Crikey, Joe is loading it up, from the AFR:
The federal government expects to report a budget deficit for this financial year of about $45 billion, a 50 per cent increase on the official estimate during the election campaign.
As the government prepares to release the mid-year economic and fiscal outlook (MYEFO) after Parliament rises in mid-December, senior sources said the final deficit figure will be about $45 billion and possibly closer to $50 billion.
The blowout from the $30 billion deficit forecast by Treasury in August has been mostly driven by spending by the new government, including an $8.8 billion one-off grant to the Reserve Bank of Australia and the decision, announced this week to not proceed with tax increases promised by Labor that would have raised $3 billion over four years.
Forecasts of revenue have continued to deteriorate.
The Coalition’s strategy is to blame the previous Labor government for the large number in the MYEFO. Mr Hockey said the Coalition would use the May budget to “repair what we have inherited’’. “Every cupboard I open has spiders in it; that’s what’s happened at the moment,’’ he said.
This is a clearing the decks excersise and a punt on the economy turning around next year for which the Government will take credit. It comes with risks, though. It will hit confidence in the short term and if the economy under-performs, Treasurer Joe is setting us up for a continuation of fiscal instability weighing on his credibility, blame Labor or not.
If the cuts flow in May, as seems be being mooted, growth will be under a lot of pressure next year. Some have already begun, from The Australian:
TONY Abbott will take an axe to 20 government committees and councils today in the first stage of a campaign to cut costs and slash redundant agencies.
…The bodies to go include the High Speed Rail Advisory Group, which includes former deputy prime minister Tim Fischer and Business Council of Australia chief Jennifer Westacott, and was set up as part of planning for a very fast train between Brisbane and Melbourne.
Also on the chopping block will be the National Housing Reform Supply Council, set up by Kevin Rudd in 2008 to ease housing shortages; the Australian Animal Welfare Advisory Committee; the Commonwealth Firearms Advisory Council, which evolved out of the gun laws set up after the Port Arthur massacre; and the Insurance Reform Advisory Group set up by Bill Shorten after the Queensland floods.
The National Intercountry Adoption Advisory Group will be scrapped and the National Policy Commission on Indigenous Housing will be taken over by the Prime Minister’s Indigenous Advisory Council.
“Many of these non-statutory bodies have outlived their original purpose or are not focused on the government’s policy priorities,” Mr Abbott said. “As a result, their work is best carried out by the relevant government departments or agencies.”
Most of the infrastructure spending aimed at offsetting the mining capex cliff does not kick in until 2015/16. I would be very careful about creating greater fiscal drag before then, as Captain Glenn hinted at on Tuesday.
Of course, much of this could be just theatre. There is still no economic narrative coming from the new Government beyond “open for business” and “blame Labor”.
