Treasurer Joe Hockey says when his mid-year budget review is released in the “next few days”, it will show how bad the books were under Labor.
The Australian economy is stuck in second gear, the budget is deteriorating and the federal government will have its work cut out trying to stimulate growth and jobs.
So says Treasurer Joe Hockey as he warns the budget update he’ll hand down in the next few days won’t be good news.
“The fact is, the economy is stuck in second gear,” he said on Wednesday after the release of soft gross domestic product (GDP) numbers for the third quarter.
“We have inherited an economy with below trend growth, rising unemployment and a deteriorating budget.”
The economy expanded by a modest by 0.6 per cent in the September quarter, the Australian Bureau of Statistics reported.
This left the annual growth rate at 2.3 per cent and below a trend pace of around 3.25 per cent.
Economists overall viewed the numbers as soft and reflecting a lack of confidence in the consumer sector, despite a pick-up in exports due to rising commodities exports.
Treasury growth forecasts released in August before the federal election have been undershot and the government now faced a repair job, Mr Hockey said.
“We need to speed up the Australian economy and I would say to our political opponents … now is not the time to play silly games in relation to the budget,” he said.
“These figures clearly illustrate the fact that budget has deteriorated significantly.”
While the government would not necessarily deliver deep budget cuts, Mr Hockey didn’t rule out cuts to public sector spending.
“We’re not obsessed with cuts. We’re obsessed with getting the budget back into good shape, into robust shape,” Mr Hockey said.
“We’re obsessed with growth and job creation.”
The government also must find ways to “fill the hole” left by slowing investment in the resources sector and stimulate the non-mining side of the economy, which could mean greater infrastructure investment.
Shadow treasurer Chris Bowen agreed the upcoming mid-year economic and fiscal outlook (MYEFO) was likely to show a deterioration in the budget bottom line.
But he mostly blamed actions taken by Mr Hockey since the election, including the decision to give the Reserve Bank of Australia (RBA) an almost $9 billion grant to replenish its reserves.
“I do accept the terms of trade and economic activity also of course have an impact,” Mr Bowen told the National Press Club.
ACTU President Ged Kearney said “slash and burn” policies would harm the economy.
“With the economy slowing, any move by the federal government to make additional cuts to spending will cost jobs and harm growth,” she said.
National Australia Bank senior economist David de Garis said the disappointing growth outcome leaves the door open for a further interest rate cuts next year to head off a potential rise in unemployment.
“It’s our continuing expectation that the RBA will come back with more monetary support in 2014,” he said.
The RBA board will next meet in February, after leaving the cash rate at an all-time low of 2.5 per cent at its meeting on Tuesday.