|Rising debt, ballooning deficit, and joblessness put Australia on bleak economic path
Australia is facing at least four more years of deficits with a A$17 billion (US$15.2 billion) blowout since September elections, according to a mid-year projection by the Tony Abbott administration.
Government debt is also forecast to rise.
Meanwhile, the troubled national carrier Qantas, which is shedding 1,000 jobs, has said it is facing record first-half losses. Qantas predicts a pre-tax loss of A$250 million to A$300 million for the half-year to December 31. Standard & Poor's has downgraded Qantas to junk status.
The mid-year assessment today delivered a bleak outlook.
The budget position has worsened “significantly'' since the 2013 pre-election economic and fiscal outlook, the government admitted.
Economic growth will slow to 2.5 per cent in 2014-15, compared with 3 per cent in the 2013 forecast. Wage growth has also been revised downward. By mid 2015 Australian joblessness is forecast to exceed 6.25 percent.
Treasurer Joe Hockey said today the conservative government of Tony Abbott had inherited a “simply unsustainable'' budget from center-left Labor and warned that without urgent action Australia would be in the red for a decade, with a deficit of A$47 billion this financial year, or 3 percent of GDP.
Net debt was forecast at A$191.5 billion, or 12.1 per cent of GDP, in 2013-14 and is expected to reach A$280.5 billion, or 15.7 per cent of GDP, in 2016-17.
“More than half the deterioration in the budget position is due to the softer economy,'' he said in releasing the new government's first budget update.
“This reflects a sharper-than-forecast fall in resources investment and a slower recovery in the non-resources sectors.''
Australia is undergoing a bumpy transition from an Asia-led decade of booming mining investment towards other drivers of growth.
The conservatives had vowed during the election campaign to bring the budget back into the black at least as fast as Labor – a deadline of 2016-17 -- but this will not happen with deficits totalling A$123 billion forecast over the next four years.
“We want to get back to surplus as soon as we can. I'm not going to make the mistake [former treasurer] Wayne Swan made [in promising a surplus],'' Hockey said when asked when a surplus might be achieved.
He said GDP forecasts for 2013 were unchanged at 2.5 percent for the current financial year to June 30, 2014, but growth had been downgraded the following year from 3 percent to 2.5 percent.
Unemployment was revised down from a peak 6.25 percent to 6 percent this financial year, but the forecasts were more pessimistic in the medium term, seen at 6.25 percent in each of the next three years.
That contrasts with pre-election forecasts by Labor of 6.25 percent in 2014-15 and 5 percent the following two years.
Chief among the A$17 billion blowout in government spending since September was an A$8.8 billion cash injection to the Reserve Bank of Australia and A$1.2 billion for the government's military-led people-smuggling crackdown.—AFP/The Standard