By Latika Bourke
Treasurer Joe Hockey has declined to deny independent analysis indicating a $51 billion hole in his budget, blaming tumbling iron ore prices for putting pressure on the bottom line.
Speaking on Adelaide radio station 5AA on Tuesday, Mr Hockey was also keen to keep consumer sentiment buoyant before Christmas, ruling out any immediate savage cuts to the budget in a bid to tackle the widening deficit.
Treasurer Joe Hockey did not deny analysis showing a $51 billion hole in the budget as the iron ore price dropped.Credit: Nic Walker
The Treasurer has put Labor on notice saying the opposition will need to eventually help the government address the deficit, if it is serious about restoring the budget to surplus.
Mr Hockey's warning coincides with the release of a private forecast, which says reduced commodity prices, combined with the Senate's decision to block key government measures, have blown a $51 billion hole in the budget.
Yet in a later interview on radio station 2GB on Tuesday afternoon, Mr Hockey said the figure was "wrong" but would not provide any further insight into the government's budget forecasts.
He said the government was still finalising its numbers for the mid-year budget update in December and was waiting on ABS data that would be released.
"The figure is wrong," Mr Hockey said. "I am confident it's not going to be around that mark."
The Treasurer added that declining iron ore prices were affecting the budget bottom line, which he also pointed to in the interview with Adelaide radio.
"You'll see it does have impact on revenue, but what this means is it's all the more important to get through the savings that we said we would deliver in the budget," Mr Hockey said.
"Because ultimately there are things we can control in the budget – such as reducing government expenditure – and there are things we can't control, such as the income associated with iron ore."
In his earlier interview with Adelaide radio, Mr Hockey said: "Iron ore prices are between 30-40 per cent less than they were when we first made our forecasts in the budget, that has a direct impact on our budget bottom line, there is no doubt about that."
The iron ore spot price has fallen from $US138 ($160) per tonne in November 2013 and was valued at $US75 per tonne as of last week, according to Bloomberg data. But the Treasurer was keen to reassure businesses of the government's intent to forgo cuts before Christmas.
"I am very focused on maintaining economic momentum in Australia in the Christmas period and beyond [so] we are not going to turn our midyear budget into a mini-budget, we are not going to go down the path of trying to make up lost ground immediately," he said.
ANZ's weekly survey of consumer sentiment conducted by Roy Morgan recorded a 0.2 per cent increase in consumer sentiment.
Chief economist Warren Hogan said confidence in the economic outlook remained subdued.
"While it is encouraging that consumer confidence is now trending higher, the pace of improvement is slightly disappointing," Mr Hogan said.
He said worsening unemployment and job losses in the aviation and manufacturing sectors combined with the already announced federal budget cuts
Mr Hockey sought to put pressure on Labor over the deficit, saying: "Sooner or later the Labor party needs to understand that they can't keep whingeing about spending more money, whilst we fail to get the revenue that was anticipated from iron ore exports and coal exports months and a year ago.".
But Labor's Treasury spokesman, Chris Bowen, said the opposition would not back the government's "unfair budget" because it was "fundamentally bad for the economy".
And Mr Bowen said Mr Hockey's warning about diminishing revenues flew in the face of his previous claims in opposition that Australia did not have a revenue problem and accused the Treasurer of abandoning his May budget.
"This is a complete and humiliating back down for the Treasurer," Mr Bowen told Fairfax Media on Tuesday.
"As world leaders fly into Australia for the G20, they are witnessing the Abbott government's first budget completely unravelling."
Mr Bowen urged Mr Hockey to "bite the bullet" and reveal the budget's true state at the "earliest opportunity".
The midyear economic update is due to be released in December. It is likely to contain some new government spending measures and further cuts to the ABC and SBS's funding.