Budget bottom line takes $7 billion hit in MYEFO

Budget revenues have fallen by a further $7 billion since the Abbott government’s first budget in May, Treasurer Joe Hockey will reveal in the Mid-Year Economic and Fiscal Outlook (MYEFO) today.

As cabinet ministers continue their attempts to get the government’s key budget measures through the parliament, today’s mid-year economic update will reveal tumbling commodity prices are continuing to take their toll.

Fairfax reports MYEFO will show Australia’s terms of trade have fallen to their worst position since 1959, while projections for China’s economic growth in 2015 will be downgraded from 7.25% to 6.75%. From 2016, Australia expects China to grow at a rate of 6.5%, instead of 7%.

Hockey told Fairfax falling commodity prices are largely to blame for continued declines in government revenue. In May, the government forecast 2014-15 revenue to total $386 billion. The revised figure is $379 billion.

This compares to $401 billion, forecast by the previous government’s final budget in 2013.

“We expect the fall in terms of trade to be twice as bad as we expected in the budget,” Hockey told Fairfax.

Hockey is expected to reveal today a forecast budget deficit of approximately $35 billion, up from $29.8 billion forecast in the May budget.

Peter Strong, chief executive of the Council of Small Business of Australia, told SmartCompany the SME community wants certainty and the government to outline a “coherent strategy”.

“We’ve done the cuts, which were necessary, but that doesn’t help with growth,” Strong says.

“We need to concentrate on growth. And if the government wants growth, they’re not going to get it from Coles and Woolies, they are already big enough. Productivity and growth will come from the small business sector, particularly in manufacturing and services.”

Strong says small businesses want “the path to productivity to be clear and impediments to growth removed”.