Joe Hockey reveals Labor's $667 billion 'debt bomb' in MYEFO statement
TAXPAYERS were on track for a $667 billion debt bomb if Labor's policies and spending was left unchecked over the next decade, budget papers reveal.
Treasurer Joe Hockey today unveiled the state of the nation's finances in Canberra, uncovering the massive debt legacy Labor was on track to deliver.
The Midyear Economic and Fiscal Outlook showed without "remedial action" and significant savings debt would blow out by to close to $700 billion - or around 26 per cent of GDP - by 2022-23.
As revealed by The Daily Telegraph earlier in the week the budget deficit for 2013-14 has increased from $30 billion in the Pre-Election Economic and Fiscal Outlook (PEFO) to $47 billion and budget deficits totalling $123 are expected over the forward estimates.
The blowout for this financial year equates to around 3 per cent of GDP.
"Without policy change and taking no remedial action, budget deficits would be projected in each and every year to 2023-24," the MYEFO states.
Unemployment is on track to rise and wage growth will decline, resulting in a downward trend in consumer confidence and a hit to the budget bottom line.
By 2015 the unemployment rate is due to increase from the current 5.8 per cent to 6.25 per cent.
Real and nominal GDP growth will face a "substantial deterioration", according to the documents.
Tax receipts will also take a $37 billion hit over the next four years, resulting in the decline in nominal GDP.
Real GDP is forecast to grow at the slower rate of 2.5 per cent in 2014-15 compared to the predicted 3 per cent just several months ago.
The end to the resources boom will also take a hit with the decline now "steeper" than it was in the PEFO.
The transition from resources to non-resources drivers of growth would be "unlikely to be seamless".
"From 2014-15 resources investment is expected to start sharply detracting from growth," the MYEFO stated.
But despite the challenges, the government said it was determined to return the budget to "sustainable surpluses" which would build to 1 per cent of GDP by 2023-24.
Revealing the MYEFO during a speech to the National Press Club in Canberra Mr Hockey said that the Coalition was "determined to fix the problems we inherited".
"We have inherited from the Labor Party Budget deficits totalling $123 billon over the next four years and unless we take action the Budget will be in deficit for at least a decade," Mr Hockey said.
Mr Hockey said Treasury was working hard on producing a Budget in May that would put the nation's economy back on track.
"We will fix the budget, we will deliver a stronger economy," he said.
In the MYEFO document the government said it had taken "essential steps" already to address the damage left by Labor, including giving $8.8bn to the Reserve Bank, addressing a $1.2 billion shortfall in border protection, restoring $1.2 billion education spending and addressing $2.9 billion in unlegislated tax and superannuation measures.
A total of $998 million in cuts to Labor's trade training centres and the axing of a community infrastructure program worth $528 million will pay for the extra $1.2 billion for schools funding.
The removal of the carbon tax was expected to "lower headline and underlying inflation by less than 1/4 of a percentage point in 2014-15.
But the ultimate cost to taxpayers of removing the levy would be $7.3 billion over the forward estimates.
"The removal of the carbon tax is also expected to support household consumption growth in the short term and make a small contribution to national income growth over the longer term," the MYEFO stated.
Mr Hockey said it gave him "no pleasure" to realise that the task the Coalition faced to bring the budget into line had grown.
"Every area of government had its surprises," he said.
"We will not leave budget problems for another day ... knowing the truth means we can get on with building investment.
"We are absolutely determined to get the economy moving again."
Lots more here http://www.dailytelegraph.com.au/news/national/joe-hockey-reveals-labors-667-billion-debt-bomb-in-my...
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