MEDIA RELEASE: Hockey's $17 billion budget blow-out

Treasurer Joe Hockey’s first Budget statement shows Mr Hockey overseeing a $17 billion blow-out in the 2013-14 budget deficit since the election and unemployment staying at 6.25 per cent for three years. 

The deficit blow-out amounts to $167 million for each and every one of the 101 days since September 7.

Australians went to the election being promised the Coalition would pay back the debt and create one million jobs.

Joe Hockey and Tony Abbott repeatedly stated “that if debt is the problem, more debt is not the answer”.

Again we see the Government doing one thing in Opposition, and doing something completely different in Government.

MYEFO confirms peak debt rising to $460 billion and the Budget balance deteriorating by $68.1 billion in just three months – including additional spending of $13.7 billion in just
101 days since the government was elected - with unemployment rising to and staying at 6.25 per cent from 2014-15.

The Abbott Government has today paved the way for deep cuts, including in areas like welfare, health and education – areas that the Coalition promised would be immune from cuts before the election.

The MYEFO reveals a 56 per cent blow-out in the 2013-14 budget deficit as against the
Pre-election Economic and Fiscal Outlook ($30.1 billion). Of the $17 billion blow-out this financial year, 60 percent is due to the decisions of this government.

This equates to a blowout of the Budget deficit $1.2 billion per week.

The MYEFO shows government spending contributing to the Budget blow-out at the same time as government revenues continue to deteriorate. Despite this, the Coalition continues to plough ahead with irresponsible spending commitments like it’s expensive Paid Parental Leave scheme and maintaining generous superannuation tax breaks for 16,000 of the wealthiest Australians.

The increase in the 2013-14 Budget deficit was driven by the decisions of this Government including an $8.8 billion grant to the RBA and tax breaks for those with super balances over $2 million, as well as a deterioration in nominal GDP since the election.

As Joe Hockey has acknowledged previously, the PEFO is the true state of the books, and MYEFO is the new Government’s first Budget statement.

These are the facts as verified by Treasury and Finance at PEFO, and now at MYEFO:

• a deficit of $30.1 billion is now $47 billion under Joe Hockey.
• peak debt of $370 billion in 2016-17 now peaks at $460 billion on Joe Hockey’s watch.
• unemployment was peaking at 6.25 per cent – it is now projected to peak at 6.25 per cent and stay there for three years under Joe Hockey

One week after doing a deal with the Greens to allow unlimited debt, the Coalition has not outlined any fiscal plan. We saw no fiscal rules or medium-term fiscal strategy today, despite Joe Hockey claims of a Budget emergency before the election.

Australians, businesses and financial markets will remain in the dark about the Government’s Budget intentions for another five months.

This Budget statement also says a lot about the Abbott Government’s values and priorities.

Joe Hockey and Tony Abbott have taken a $13.7 billion hit to the Budget bottom line to give, among other concessions, tax breaks to large multinational corporations, big tax breaks to people with super balances over $2 million and tax breaks for those who borrow to invest overseas.

At the same time, the Abbott Government has hurt up to 2.7 million small businesses missing out on the instant asset write-off, up to 110,000 small businesses missing out on a lower threshold for the loss carry back provisions and up to 3.6 million low and middle incomes earners now having to pay super tax on their contributions.

Coalition spending in MYEFO

MYEFO also confirms that the Coalition have not offset nearly $14 billion of spending.

This is in stark contrast to Labor’s fiscal strategy of offsetting all new spending commitments.

MYEFO confirms the Government will pay $8.8 billion to the Reserve Bank this financial year, a decision that will increase interest costs by more than $1 billion over the forward estimates.

A decision that remains shrouded in secrecy, a decision never justified to the Australian public, with Joe Hockey refusing to release any correspondence from the Governor of the Reserve Bank of Australia.

The Coalition has blamed this blowout on Labor. This is despite Labor’s policy being costed independently by PEFO prior to the election under Peter Costello’s Charter of Budget Honesty.

Under the Charter of Budget Honesty, Labor had a Budget that was set to return to surplus in 2016-17.


Tony Burke