The government is planning to release the 2012-13 MYEFO at 11 am tomorrow morning. It is a bit early but timely.* It is now very clear that the government is going to struggle to meet its promised budget surplus (as we at the Cat having been saying for a long time). This is how the Wall Street Journal describes the situation:
The push for new savings comes as the wider economy slows in line with weaker global growth. Unemployment rose to 5.4% in September from 5.1% the previous month and the nation’s trade deficit has expanded to its widest level in more than four years.
Mr. Swan will outline the revenue measures in the government’s midyear economic review due on Monday, which will include sharp cuts to the government’s revenue forecasts even as the outlook for economic growth remains intact at around 3.0%.
That is one way of looking at things – but incomplete. The biggest problem the Rudd-Gillard government have had in balancing budgets is their excessive spending. Rather than cut spending they have chosen to rely on dodgy revenue forecasting, various tax increases, new taxes, and cutting proposed spending (but not actual spending) to achieve a rather modest forecast budget surplus.
The vultures are coming home to roost and I’ll be interested in seeing who buys whatever spin the government is going to have to produce.
* In Australia corporations face a continual disclosure regime – I see no reason why the federal government shouldn’t have to report its own finances on the same basis.