Hockey slams Swan’s modest budget

Opposition treasury spokesman Joe Hockey has slammed Treasurer Wayne Swan’s claims of releasing a fiscally responsible budget on Tuesday.

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Swan said on Sunday that the deficit in Tuesday’s budget will be less than the government forecast a year ago, and reiterated the budget will be ‘no-frills’ with no room for a pre-election spendathon.

He told the Nine Network companies are still suffering from significant losses incurred during the global recession, which remain a drag on government revenues.

He’s pledged a two per cent cap on spending and savings to try to get the budget back to surplus, adding that he would offset all new spending.

The opposition took the opportunity to slam the government’s handling of the economy.

“Make sure you hang on to your wallet,” Hockey remarked afterwards.

“When they say it’s a boring budget, you may well expect new and higher taxes, you can certainly expect a deficit.”

“It should not be a boring budget. This should be the budget that lays the platform for Australia’s future,” he told ABC Television.

“This is the moment when we should be seizing the future, not reflecting on it as boring.”

Instead, the government has locked in five to six years of deficits for what was just three months of negative economic growth as part of the global downturn, he said.

With better management, it could reduce that to three to four years, he said.

Expert predicts surplus from 2015/16

Meanwhile an independent economic forecaster says that if the Chinese economy remains strong, the Australian budget could be back in surplus by 2013/14, but no sooner.

The government is currently projecting that the budget will return to surplus in 2015/16.

“If China stays strong, then by 2013/14 we will be back in surplus,” Access Economics economist Chris Richardson told Network Ten.

“More than anything else, it comes down to what happens in China. These days the budget has a `Made in China’ stamp.”

But he said 2013/14 would be the earliest a surplus could be returned.

He said the budget took a bigger hit than most people realise and revenues will not be revised up as fast as they think.

“A year ago it looked like sack cloth and ashes and a very big recession around the world and a recession here,” he said.

He said the government took out a lot of insurance off the back of that, and as it turned out “too much insurance”.

The cost of the stimulus means there will still be a big deficit for 2009/10, and while 2010/11 will be smaller by $12 billion, it will still amount to $35 billion.

Mr Richardson doubts that the government will bring down a budget that will take the pressure off interest rates.

“It’s an election year. I don’t think the cuts will be as big as necessary,” he said.

He expects the Reserve Bank of Australia to raise the cash rate three more times this year which will take the cash rate to 5.25 per cent from 4.5 per cent currently.