http://au.news.yahoo.com/a/-/newshome/5123004/govt-slashes-budget-surplus-forecasts/
The federal government has jacked up forecasts for future unemployment as the global financial crisis and economic downturn take their toll on the domestic economy.
And the news could get worse if the international environment deteriorates, Treasurer Wayne Swan warned releasing his mid-year budget review.
The Mid-Year Economic and Fiscal Outlook (MYEFO) now puts the jobless rate at 5.0 per cent by June next year, accelerating to 5.75 per cent by June 2010. The unemployment rate currently sits at 4.3 per cent.
"The employment numbers in MYEFO do show that there will be pain in the community," Mr Swan told reporters in Canberra.
"We believe that growth will remain positive, but we're not immune from more dramatic impacts that could occur, of course. That will have flow-on effects in terms of the surplus and growth into the future."
Budget surpluses and economic growth forecasts have been slashed, although economists believe the government is still being too optimistic in its predictions given the current climate.
MYEFO now puts the 2008-09 budget surplus at just $5.4 billion compared to the $21.7 billion estimated in the May budget.
The 2009-10 surplus has also been reduced to a meagre $3.6 billion from the $19.7 billion projected in May.
"There's no point in trying to sugar-coat these figures ... the global financial crisis has smashed a $40 billion hole in the budget," Mr Swan said.
That "hole" is due to a predicted dramatic drop in tax receipts over the next four years, caused partly by reduced capital gains taxes as result of a slump in global share markets.
Prime Minister Kevin Rudd said the government remained determined to do everything possible to support positive economic growth and to continue to support a reasonable budget surplus.
"But the global financial crisis represents a real threat," Mr Rudd told reporters in Launceston.
"And as the global financial crisis deepens, these challenges become tougher and tougher."
Opposition Leader Malcolm Turnbull says the federal government does not have the ability to manage the Australian economy and is guilty of talking it down.
Mr Turnbull accused Treasurer Wayne Swan and Prime Minister Kevin Rudd of mismanaging the economy, saying they had unnecessarily talked up the threat of inflation, failed to predict the true impact of the sub-prime crisis, and botched the introduction of the government's deposit guarantee scheme.
"I am concerned that the government does not have a very good handle on these issues of economic management," Mr Turnbull told reporters in Sydney.
"Right through this year, Mr Swan has made one bad call after another."
Mr Turnbull accused the prime minister of preaching doom and gloom in the wake of the global financial crisis, saying his comments were eroding confidence in the Australian economy.
"He told us only a few days ago that next year was going to be ugly - what an incredible thing for a prime minister to say. Is that meant to inspire confidence?" Mr Turnbull asked.
"The fact is that in the MYEFO document, growth is projected next year to remain positive - that compared to other countries would be a very good result.
"This endless stream of emotional rhetoric that we get from Mr Rudd is undermining confidence."
Opposition treasury spokeswoman Julie Bishop said that while the growth forecast remained at two per cent there was "absolutely no reason" for the budget to go into deficit.
But she said this was a dramatic turnaround in the figures that the government inherited when it came to office a year ago.
"At that time all the economic indicators were heading in the right direction, now they're heading in the wrong direction," she told reporters in Sydney.
"The government is very keen to blame the global financial crisis for everything but, in fact, a number of the government's policies and the government's handling of the economy have made conditions worse in Australia."
However, economists said the budget could well fall into deficit, and that would be appropriate as the economy comes under pressure.
NAB Capital chief economist Rob Henderson said he expected the budget to fall into a $10 billion deficit in 2009-10, although he is forecasting growth of just 1.5 per cent in both this and next financial year.
"Against the backdrop of the weak economic outlook, allowing the budget to go into deficit would be excellent fiscal policy," Mr Henderson said.
MYEFO was released as new economic data continued to show grim readings.
Building approvals slumped further by 7.2 per cent in September to be 21.6 per cent lower than a year earlier.
The September plunge in approvals came before the Reserve Bank of Australia's two large interest rate cuts, in October and on Tuesday, but it adds to the case for further rate reductions in coming months.
Financial markets are currently pricing in a further cut of 75 basis points in the central bank's cash rate in December, matching Tuesday's surprise reduction to 5.25 per cent.
Still, there was one bright spot in the recent spate of gloomy numbers.
Australia's trade surplus ballooned to $1.46 billion in September, three times the size of economists' expectations.
This follows an equally healthy $1.24 billion surplus in August, making it the best two monthly trade performances since the mid-1990s.
The federal government has jacked up forecasts for future unemployment as the global financial crisis and economic downturn take their toll on the domestic economy.
And the news could get worse if the international environment deteriorates, Treasurer Wayne Swan warned releasing his mid-year budget review.
The Mid-Year Economic and Fiscal Outlook (MYEFO) now puts the jobless rate at 5.0 per cent by June next year, accelerating to 5.75 per cent by June 2010. The unemployment rate currently sits at 4.3 per cent.
"The employment numbers in MYEFO do show that there will be pain in the community," Mr Swan told reporters in Canberra.
"We believe that growth will remain positive, but we're not immune from more dramatic impacts that could occur, of course. That will have flow-on effects in terms of the surplus and growth into the future."
Budget surpluses and economic growth forecasts have been slashed, although economists believe the government is still being too optimistic in its predictions given the current climate.
MYEFO now puts the 2008-09 budget surplus at just $5.4 billion compared to the $21.7 billion estimated in the May budget.
The 2009-10 surplus has also been reduced to a meagre $3.6 billion from the $19.7 billion projected in May.
"There's no point in trying to sugar-coat these figures ... the global financial crisis has smashed a $40 billion hole in the budget," Mr Swan said.
That "hole" is due to a predicted dramatic drop in tax receipts over the next four years, caused partly by reduced capital gains taxes as result of a slump in global share markets.
Prime Minister Kevin Rudd said the government remained determined to do everything possible to support positive economic growth and to continue to support a reasonable budget surplus.
"But the global financial crisis represents a real threat," Mr Rudd told reporters in Launceston.
"And as the global financial crisis deepens, these challenges become tougher and tougher."
Opposition Leader Malcolm Turnbull says the federal government does not have the ability to manage the Australian economy and is guilty of talking it down.
Mr Turnbull accused Treasurer Wayne Swan and Prime Minister Kevin Rudd of mismanaging the economy, saying they had unnecessarily talked up the threat of inflation, failed to predict the true impact of the sub-prime crisis, and botched the introduction of the government's deposit guarantee scheme.
"I am concerned that the government does not have a very good handle on these issues of economic management," Mr Turnbull told reporters in Sydney.
"Right through this year, Mr Swan has made one bad call after another."
Mr Turnbull accused the prime minister of preaching doom and gloom in the wake of the global financial crisis, saying his comments were eroding confidence in the Australian economy.
"He told us only a few days ago that next year was going to be ugly - what an incredible thing for a prime minister to say. Is that meant to inspire confidence?" Mr Turnbull asked.
"The fact is that in the MYEFO document, growth is projected next year to remain positive - that compared to other countries would be a very good result.
"This endless stream of emotional rhetoric that we get from Mr Rudd is undermining confidence."
Opposition treasury spokeswoman Julie Bishop said that while the growth forecast remained at two per cent there was "absolutely no reason" for the budget to go into deficit.
But she said this was a dramatic turnaround in the figures that the government inherited when it came to office a year ago.
"At that time all the economic indicators were heading in the right direction, now they're heading in the wrong direction," she told reporters in Sydney.
"The government is very keen to blame the global financial crisis for everything but, in fact, a number of the government's policies and the government's handling of the economy have made conditions worse in Australia."
However, economists said the budget could well fall into deficit, and that would be appropriate as the economy comes under pressure.
NAB Capital chief economist Rob Henderson said he expected the budget to fall into a $10 billion deficit in 2009-10, although he is forecasting growth of just 1.5 per cent in both this and next financial year.
"Against the backdrop of the weak economic outlook, allowing the budget to go into deficit would be excellent fiscal policy," Mr Henderson said.
MYEFO was released as new economic data continued to show grim readings.
Building approvals slumped further by 7.2 per cent in September to be 21.6 per cent lower than a year earlier.
The September plunge in approvals came before the Reserve Bank of Australia's two large interest rate cuts, in October and on Tuesday, but it adds to the case for further rate reductions in coming months.
Financial markets are currently pricing in a further cut of 75 basis points in the central bank's cash rate in December, matching Tuesday's surprise reduction to 5.25 per cent.
Still, there was one bright spot in the recent spate of gloomy numbers.
Australia's trade surplus ballooned to $1.46 billion in September, three times the size of economists' expectations.
This follows an equally healthy $1.24 billion surplus in August, making it the best two monthly trade performances since the mid-1990s.
