Govt faces tough task with budget: PM

With the Australian economy threatening to fall further into the red, the government
is facing the toughest budget "in our lifetime to frame", Prime Minister Kevin Rudd
says.
Finance Minister Lindsay Tanner concedes it is yet to be seen whether the government
can remain within the $200 billion debt limit it set in February.
Mr Rudd and senior government ministers on Thursday have made dire predictions about
the budget after a new International Monetary Fund (IMF) report predicted the
economy would shrink by 1.4 per cent this year while unemployment would rise from
5.7 per cent to 7.8 per cent next year.
Mr Tanner says the government would revise its forecasts for the coming year right
up until the eve of the budget, which will be delivered on May 12.
While the government's razor gang continues its search for spending cuts Mr Rudd
has given a strong hint it would not continue to pay out the higher home buyers
grant beyond June 30.
Treasurer Wayne Swan and Mr Tanner have refused to comment on speculation of budget
cost-cutting including the possible means testing of the 30 per cent private health
insurance rebate.
"The IMF report paints a very bleak outlook for the global economy and puts beyond
doubt that this is the toughest budget in our lifetime to frame," Mr Rudd said.
"The deepening global recession will have severe consequences for our budget and our
forecasts for growth, for unemployment and for taxation revenues."
Two key business groups on Thursday called on the government to invest in
infrastructure and to subsidise apprentice wages.
Australian Chamber of Commerce and Industry chief executive Peter Anderson said
employers should be granted a temporary break on part of their payroll tax given the
IMF forecasts the number of jobless could rise by as many as 300,000 people.
Australian Industry Group chief executive Heather Ridout warned that apprenticeship
starts had already fallen "quite markedly", making the need for a wage subsidy
urgent.
Ms Ridout conceded the government had no option but to go into debt.
"The most important thing is to make sure we've got a credible plan to exiting it,"
Ms Ridout said.
Mr Tanner said the latest IMF forecasts revealed the collapse in government revenue
had been far more serious than the $115 billion fall revealed in February.
"We have yet to finalise our projections of the loss of revenue that this further
deterioration of the global economy will be imposing on the Australian economy and
the Australian budget," Mr Tanner said.
"It's pretty clear from these figures that we'll see even bigger deficits as a
result of that change."
The latest deficit forecast is $35.5 billion but some economists are predicting the
deficit could go as high as $50 billion, a stark turnaround from the 2008 budget's
surplus of nearly $22 billion.
But Mr Tanner refused to speculate on the likely size of the deficit.
"It's clear from the IMF data that the projections for loss of revenue that were
published in February are now out of date and we'll see more serious loss of revenue
than was expected. How much more is yet to be seen," he said.
Opposition Leader Malcolm Turnbull accused the government of wasting money on
stimulus "cash splashes" and said it should do more to support small business so it
can retain jobs.
Mr Turnbull said the government should bring forward scheduled tax cuts and ease the
pressure on small business.
"My criticism of the government is that they have had a range of big spending, big
borrowing programs which have been ineffective, which have not created any jobs," Mr
Turnbull said.
But Mr Rudd accused Mr Turnbull and his treasury spokesman Joe Hockey of
inconsistency and using some of the "shonkiest, snake-oil" arguments to attack the
government.
"Unfortunately, Mr Turnbull and Mr Hockey have become the dodgy brothers of
Australian politics," Mr Rudd said, adding the government had the "balance right"
and would continue to invest in infrastructure and jobs.