Hockey plots path back to surplus

Australian Treasurer Joe Hockey expects a return to surplus in 2019/20. Photo / Getty Images

Revenue is plummeting and the deficits are swelling but the Australian Government remains adamant it'll have the Budget back in surplus within the decade.

The deficit is expected to balloon to A$35.1 billion ($37.89 billion) in 2015/16 - A$4 billion worse than Treasury's December forecast but better than the A$41 billion economists expected.

Deficits for 2016/17 and 2017/18 have also deteriorated since the Government's mid-year update but Treasury still expects a return to surplus in 2019/20 after more than a decade in the red.

Budget documents show government revenue has taken a massive hit in the past year, mostly because of plummeting iron ore prices but also sluggish wage growth, with expected tax receipts downgraded by A$52 billion over the four years to 2017/18.

Economic growth forecasts have also been downgraded amid a slower-than-expected rebound in non-mining business investment, while unemployment is expected to hit 6.5 per cent over the next year -- a level not seen since June 2002.

Despite the doom and gloom, Treasurer Joe Hockey says the path to surplus is a credible one.

But he said last night that the hard work wasn't over and Australia needed to live within its means.

"Of course there is more work to be done on Budget repair," he said.

With a focus on jobs and small business, Hockey's second Budget includes tax cuts and tax deductions aimed at encouraging small businesses to invest and hire as the non-mining sectors of the economy struggle to grow in the wake of the mining investment boom.

Chris Richardson from Deloitte Access Economics said the Government had toned down Budget repair and gone for something more popular.

"The Government can at best say it's done nothing extra in this Budget - on the one hand, it's saying more needs to be done, on the other hand, it's saying, we're not doing it now," Richardson said.

He said although the Budget numbers looked better than expected, there were plenty of ifs and buts that could get in the way.

"The caveats are still pretty big -- one, that the Senate rolls over fast, two, that the states wear some pretty big spending cuts from last year and three, that China and commodity prices, which are pretty wobbly these days, hold the line."

Market Economics managing director Stephen Koukoulas said it was a forgettable Budget that would likely be shrugged off by business and consumers.

Koukoulas said: "If they'd fixed the Budget deficit and reduced debt, fine, or if they'd said they were going to run a slightly bigger deficit but lower unemployment, fine, but they've done neither."

Forecasts

• 2.75 per cent economic growth in 2015/16

• 6.5 per cent unemployment in 2015/16

• 2.5 per cent inflation over next four years

- AAP