Today, we release the first transparent and comprehensive account of the historic debt and deficits inherited from Labor.
The Mid-Year Economic and Fiscal Outlook forecasts a $47 billion deficit in 2013-14, and $123 billion worth of cumulative deficits over the forward estimates.
The budget position since the Pre-Election Economic and Fiscal Outlook, released on August 13, has deteriorated by $68 billion over the forward estimates.
In the absence of any policy changes from what we have inherited, the Budget would not return to surplus within the 10-year medium-term projections. During this time, gross debt on issue is projected to increase to $667 billion.
The Budget the Coalition has inherited is simply unsustainable.
More than half the deterioration in the budget position is due to the softer economy. Real GDP growth is forecast to be 2½ per cent in 2013-14, unchanged from the Pre-Election Economic and Fiscal Outlook, but has been downgraded ½ of a per cent to 2½ per cent in 2014-15.
This reflects a sharper-than-forecast fall in resources investment and a slower recovery in the non-resources sectors.
Downward revisions to nominal GDP – caused by soft growth in wages and prices as well as the downgrade to real GDP growth – has flowed straight through to the Government’s revenue base and driven a write-down of tax receipts of around $37 billion over the forward estimates.
A softer economy has also impacted on the payments side of the Budget.
The government is also dealing with a number of legacy issues inherited from the former government, including:
- The Reserve Bank of Australia, whose Reserve Bank Reserve Fund was depleted to 3.8 per cent of assets at risk under Labor, required an $8.8 billion grant to allow it to deal with potential economic challenges.
- A backlog of 92 unlegislated tax and superannuation measures at a cost of $2.9 billion.
- A $1.2 billion shortfall in funding for offshore processing of asylum seekers.
- Restoring $1.2 billion in funding for schools in Western Australia, Northern Territory and Queensland that was ripped out of the estimates by then Education Minister Bill Shorten in the 2013 Economic Statement
It was critical to deal with these and other measures to help give an honest and transparent assessment of the current state of the nation’s books.
Now we must undertake the necessary reforms and help create the right environment for the economy to get back on track and support growth.
We have inherited a budget clearly in structural deficit.
Under Labor, real Government spending grew at around 3.5 per cent over the five years from 2007-08 to 2012-13 – and is expected to grow further to 3.7 per cent over the medium term.
The National Commission of Audit is examining the role and scope of government and the efficiency of government spending. It will be guided by three principles, that the government should: live within its means; have respect for taxpayers in the care with which it spends every dollar; and do for people what they cannot do, or cannot do for themselves.
Today’s MYEFO draws a line in the sand after six years of economic and budget mismanagement from Labor. We know that fixing the budget is not a short-term task. However, our plan will restore the Budget and build a prosperous economy.
Following the recent amendment of the Charter of Budget Honesty Act 1998, the face value of Commonwealth stock and securities on issue subject to the Treasurer’s Direction under the Commonwealth Inscribed Stock Act 1911, as at 17 December 2013 total $292 billion.