The government has unveiled a pre-election economic statement that downgrades growth and revenue forecasts and resumes cutting spending in an effort to meet Labor’s commitment to return to surplus in 2015-16.
The statement anticipates a further downgrade in revenue of $33.3 billion over forward estimates, driven by a significantly softer economy. Unemployment is expected to peak at 6.25% this financial year and next, 0.5 points higher than forecast in the May budget. Inflation is likely to be slightly higher this year but a little lower next, and GDP is expected to be softer, at just 2.5% in 2013-14, rather than 2.75%, taking growth well below trend. However, the biggest change from the budget point of view is a dramatic downward revision of nominal GDP growth, from 5% in the budget to 3.75% this year and from 5% to 4.5% in 2014-15.