|Opposition bristles over Australia economic woes
Australia’s opposition Labor and Greens parties accused the Abbott administration of setting the stage for major spending cuts today after the treasurer warned that Australians would have to “adjust their expectations of what government can sustainably provide.’’
“He's preparing the ground for deep and brutal cuts come budget time, cuts to come which will affect every Australian,'' said Labor finance spokesman Chris Bowen, AFP reports.
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. Deficits of A$123 billion were forecast over the next four years.
The update committed the government to “returning the budget to sustainable surpluses that build to at least 1 percent of GDP by 2023-24.’’
"We want to get back to surplus as soon as we can,'' Treasurer Joe Hockey said.
“It will require a sustained and fundamental structural overhaul of expenditure. All options are on the table.''
Detailed cuts are expected in the May budget.
Hockey 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 as the workforce aged and younger workers delayed entry.
That contrasts with pre-election forecasts by Labor of 6.25 percent in 2014-15 and 5 percent the following two years.
Ratings agency Moody's said the “somewhat worse projections'' on growth and deficit were “clearly credit negative'' but did not pose a risk to the government's Aaa credit rating.
“The rise in the debt ratios that would result from these deficits, while clearly a negative trend, still leaves Australia in a relatively favorable position compared to almost all other Aaa-rated sovereigns,'' Moody's said.
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.