The Australian government will fail to deliver a pledged budget surplus before an election in 2013, with the nation set to extend a run of deficits to at least six years, Deloitte Access Economics said.
The underlying cash deficit will be A$4.2 billion ($4.4 billion) in the 12 months ending June 30 and A$5.1 billion the year after, Chris Richardson of the Canberra-based research company said in a report released today. Even so, the current year will see a A$40 billion improvement from the prior year, said Richardson, a former Treasury economist.
“Revenues are volatile -- increasingly so -- meaning that promising surpluses that are wafer thin is courageous,” said Richardson, referring to the government’s projected A$1.08 billion surplus at its mid-year review released two weeks ago. “It’s too easy to see those surpluses melt amid relatively small shifts in the economy.”
Prime Minister Julia Gillard is bidding to end four years of deficits heading into an election year with polls showing her government neck-and-neck with the opposition Liberal-National coalition. As the government reins in spending, she’s putting the onus on the central bank to further reduce the highest benchmark interest rate among major developed nations to bolster a slowing economy.
Deloitte Access projects mining and petroleum taxes will fall A$3.3 billion short of the government’s estimates and, together with weaker company tax revenue and other levies, leave overall collections A$4.7 billion below last month’s forecast. It predicts that shortfall will swell to A$5.8 billion in the year ending June 30, 2014.
“Commodity prices have had a hissy fit,” Richardson said in the report. “And the Australian dollar hasn’t yet fallen alongside commodity prices, meaning mining revenues -- denominated in Australian dollars -- have taken something of a bath in recent months.”