Coalition demands its share of credit for Australia's healthy economy

Opposition treasury spokesman Joe Hockey has rejected the suggestion that Australia's Labor Government has built an economy that is the envy of the world.

Rather, it was the former Howard Government that did all the heavy lifting, he says.

Hockey continued his attack on the Government after Tuesday's release of its mid-year budget review showed deeper deficits of A$1 billion ($1.28 billion) to A$2 billion this financial year and next.

It also showed economic growth accelerating, leading to a further drop in the jobless rate to 4.5 per cent by mid-2012, but pushing the inflation rate up to the top of the Reserve Bank of Australia's inflation target.

Treasurer Wayne Swan has frequently called Australia the envy of the world, because not only did the economy avoid the global recession but unemployment is half that of major economies and the budget is forecast to be back into surplus before those of other countries.

But Hockey rejects the idea that this is all Labor's doing.

"They inherited to the envy of the rest of the world. Let's get it right," he told ABC Radio yesterday.

He said the Government had a A$41 billion deficit and should be "saving for a rainy day" while it had the best terms of trade in 50 years and was looking towards unemployment of 4.5 per cent.

A Coalition government would reduce staff numbers in the commonwealth public service and cut the "dumb" cash for clunkers policy.

"It's not going to do anything about greenhouse gas emissions, but we're still committing, from memory, over A$250 million to it," he said.

NAB Capital chief economist Rob Henderson said that while variations in the review to the budget bottom line were "immaterial", he felt it was time the Government started tightening the purse strings further.

"The forecasts embody a degree of fiscal tightening. Although it must be said that this tightening was put in place when many of the stimulus measures were enshrined in the 2009 Budget, when the Government was forecasting a full-blown recession.

"With a much better economic outcome since those forecasts were made, a more repaid fiscal tightening would take some pressure off interest rates."

But Swan said he was unlikely to make any significant budget decisions based on the latest update that showed that a strong Australian dollar had wiped about A$10 billion off revenues.

He also rejected the Opposition's claims that he had failed to make tough budget decisions, saying, "We are putting in place our strict fiscal discipline. Whatever the levels of the dollar, we will make sure we meet our fiscal targets."

- AAP