Australia said yesterday its budget deficit has blown out to A$30 billion (US$26.6 billion) and revenues are shrinking, as it unveiled a preelection mini-budget that includes a controversial plan to tax bank deposits.
The government also cut its growth outlook for the fiscal year to June next year as the mining-driven economy grapples with a Chinese slowdown that has seen prices of commodities tumble.
With national polls approaching, Australian Treasurer Chris Bowen said tough conditions had seen a further A$33.3 billion wiped off revenue estimates over the next four years. This, he said, had forced the ruling Labor party into A$17.4 billion of “responsible savings.”
The statement’s release added to speculation that Australian Prime Minister Kevin Rudd could call an election as early as this weekend, having now outlined fresh budget numbers, as well as new policies on a raft of key issues.
The government also upped its forecast unemployment rate for the 2013-2014 fiscal year by 50 basis points to 6.25 percent.
However, while the budget deficit for this fiscal year had ballooned from the A$18 billion forecast in the May budget, Bowen stuck to the government’s plan to return a surplus in 2016-2017.
He said the fall in commodities prices sparked by weakening growth in key export market China meant Australia’s economy would grow 2.5 percent from last month to June next year, slower than the 2.75 percent forecast in May. It is expected to rise to 3 percent for the 2014-2015 fiscal year.
“The transition in the resources sector from a record investment boom to strong growth in production and exports is currently under way,” he said. “This will mean that non-mining sectors of the economy will need to lead growth in the future. This transition poses challenges for the economy.”
AMP chief economist Shane Oliver said he was stunned at the scale of the deficit and speed at which it had worsened.
“I’m shocked by how much it has deteriorated,” he said, adding that the promised return to surplus has been repeatedly delayed.
“We seem to keep pushing out the return to surplus and the return to surplus gets steeper and steeper as time goes by,” he said.
In a bid to plug its revenue shortfall the government this week announced a plan to hike tobacco taxes by 12.5 percent per year over the next four years, to raise more than A$5 billion.
And yesterday, Bowen said he will also tax bank deposits up to A$250,000 at 0.05 percent from 2016, raising a forecast A$733 million in the first 18 months.
Bowen said the cash would go into a new Financial Stability Fund, but will be counted as revenue in the budget, to protect savings in the event of a bank collapse.