Australia looks to avoid voter backlash with 'fair' budget

Australian Treasurer Joe Hockey insisted on Tuesday he will deliver a "responsible and fair" budget as the government battles to juggle slumping revenue and a huge deficit while avoiding a voter backlash.

The conservative government of Tony Abbott is promising to make families and small businesses their priority after a fierce reaction to its maiden budget last year which took the axe to welfare, education and health spending.

That budget was designed to rein in a deficit inherited from the previous Labor administration but was so badly received it saw a plunge in poll ratings that triggered a challenge to Abbott's leadership.

He survived but with an election needing to be held by January 2017 the government is keen to shore up support and has vowed no nasty surprises this year.

"The budget is actually going to be focused on the issues that matter to Australians," Hockey told reporters ahead of handing down the document at 0930 GMT.
"We are focused on strengthening the Australian economy, giving people the opportunity to get ahead, to have a go."

Analysts have predicted the budget deficit will surpass Aus$40 billion (US$31.7 billion) in 2015-16, with Deloitte Access Economics likening the figure to a "horror story" akin to the work of fiction writer Stephen King and Norwegian artist Edvard Munch, famous for his tortured artwork The Scream.

"Our big problem is that there was a magnificent China boom over the last decade," Deloitte Access Economics partner Chris Richardson said in forecasting a deficit of Aus$46 billion this fiscal year.

"That China boom was a budget boom, but increasingly China is slowing. Things like iron ore prices are lower than they used to be; the budget boom is turning into a budget bust."

Australia has avoided falling into recession for more than two decades. But the unprecedented mining investment boom is ending and growth in non-resources sectors has yet to fill the gap.
Hockey insisted the deficit figure would be lower than many analysts expected.

"Market expectations are for a budget deficit of around Aus$40-41 billion. We're going to beat that and we're going to beat it every year," he said.

The government said in the 2014 budget it wanted to reduce the then deficit from Aus$49.9 to Aus$29.8 billion this year, but with some of its planned cuts still stuck in the upper house, the Senate, this appears unlikely.

Hockey noted that Aus$90 billion of expected revenue had been written off in the last 18 months due to plunging commodity prices and a slowdown in key trading partner China, but insisted "we are still on a credible trajectory back to surplus".

"And we're doing that despite all the different head winds," he said.

"So this is delivering on what we've all been saying. It's responsible, it's measured and it's fair and it's going to be a big help for Australia's small businesses and Australian families."

Labor opposition leader Bill Shorten said the budget would be more about face-saving than fairness.

"It will be about a prime minister and a treasurer not focusing on the next 10 years in the future of Australian jobs, it will be them focusing on keeping their own jobs to the end of the year," he said.