The Australian government’s Mid-Year Economic and Fiscal Outlook is due for release today
- The government has already dropped plans for a return to surplus by 2016-17
- The last economic update, released by Treasury during the election campaign, forecast a $30 billion deficit for this financial year and debt to peak at $370 billion in 2016-17.
- MYEFO will forecast a deficit close to $50 billion this financial year and debt to exceed $500 billion beyond the four-year budget forecasts.
Bill Evans, chief economist at Westpac, warned MYEFO was likely to trigger a repeat of what happened in August, when consumer confidence fell sharply following the former government’s $30 billion pre-election budget write-down.
“It will affect people’s confidence,” he said. “If the headlines are ‘substantial budget blowout’, from $50 billion to $100 billion, that would unnerve both business and households.”
Economists argue the budget update could cause a pre-Christmas hit to already fragile consumer sentiment, especially coming so soon after damaging news on General Motors/Holden. Figures last week are already showing business and consumer confidence dropping
More at Australian Financial Review (gated)
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I asked earlier if the MYEFO could propmt some sort of action from rating agencies. This is a risk for the AUD. Australia currently has a AAA rating.
