Finance Minister Penny Wong says the federal government has been fully prepared for a further write-down in revenues as it puts together its May 8 budget.
This would be on top of the previously announced $140 billion hit to revenues since the global financial crisis.
Canberra-based economic consultant Macroeconomics estimates that some $10 billion has been wiped off government income since the mid-year budget review released in November, largely business tax receipts.
This is driven by a declining terms of trade, lower capital gains receipts, and company tax receipts being eroded by a high Australian dollar and large depreciation write-offs associated with mining investment, it said in its pre-budget analysis released on Friday.
Quizzed on this estimate, Senator Wong said she and Treasurer Wayne Swan had anticipated “further revenue downgrades in the budget”.
Macroeconomics’ estimates makes the government’s massive task of returning the budget to surplus in 2012/13 that more difficult.
Before policy changes – spending cuts or revenue increases – the consultant forecasts a deficit of $7.8 billion for 2012/13, rather than the $1.5 billion surplus predicted five months ago.
For the current financial year (2011/12) it expects a deficit of $40.1 billion, up from $37.1 billion in the mid-year review.
Senator Wong admits returning to a budget surplus “will not be an easy task”.
“(But) it ensures that we will have a buffer in this time of global uncertainty,” she told reporters after delivering a speech in Sydney.
Her comments came as the International Monetary Fund (IMF) warned that a renewed escalation in Europe’s difficulties would put the Asia-Pacific region’s buoyant economic outlook at risk.
Releasing its regional outlook, the IMF said the key risk would be a sharp fall in exports to advanced economies and a reversal of foreign capital flows that would severely affect activity in the region.
It forecasts Australian growth at 3.0 per cent in 2012, unchanged from its view in January, and 3.5 per cent in 2013, down 0.1 per cent from its previous projection.
“Continued strong commodities demand and prices will sustain activity in Australia,” it said.
However, it also notes that a strong exchange rate and cautious household spending has acted as a drag on growth.
In a her speech to the PerCapita Pre-Budget Forum, Senator Wong said returning a surplus “is not simply an accounting exercise”, but good economic management for the future.
“Because our responsibility is not only to provide social services today, but to work to ensure the economy and the budget will sustain them into the future,” she said.
She said Australia faces greater demands for services and fewer taxpayers to fund them, with an ageing population in the years ahead.
By 2050, there will be 8.1 million people over 65 compared with some three million currently, while the proportion of people of working age will also fall dramatically.
This will “drive challenges across the social policy spectrum, but most pointedly in health”, she said.
A poll commissioned by the Australian Conservation Foundation found 77 per cent of Australians think the diesel fuel rebate for miners should be scrapped in the budget, and the $2 billion saved would be better spent on health and education.
“If the government is looking for savings in the budget, the first things that should go are senseless tax breaks that promote pollution,” foundation chief executive Don Henry said in a statement.