The federal government faces a forecast revenue shortfall of more than $20 billion over the next four years, prompting a robust internal debate about whether the budget razor gang should make cuts to offset all the losses or delay the surplus yet again.
Cabinet’s Expenditure Review Committee is due to meet again on Friday amid rising concern that a fresh round of severe budget cuts on the cusp of an election campaign would be political suicide.
Measures under consideration to help plug the revenue hole include increases in tobacco excise, abolishing loss carry-back tax provisions for business, and tightening family tax benefits and so-called middle-class welfare.
The ERC is looking to finalise savings measures so Treasurer Chris Bowen can release an economic statement before an election is called.
Ten days into the campaign, Treasury will release its own pre-election fiscal outlook (PEFO). The government wants to get the economic statement out first to pre-empt any shock the revenue write-downs in the PEFO would create.
But shadow treasurer Joe Hockey told The Australian Financial Review the process was becoming a sham and the Coalition would no longer respect the figures in either the economic statement or PEFO.
Previously, he promised to release detailed costings of Coalition policies only when PEFO was released. Now, he said, that pledge may no longer hold.
“We’re not going to cop the Treasury being bullied by the government into producing PEFO numbers that are closely aligned to the government’s,” he said.
“If PEFO looms the same as the economic statement, then PEFO won’t be worth the paper its written on.”
Mr Bowen has previously committed the government to honouring the May budget timetable in which the budget would be balanced by 2015-16 and return to surplus in 2016-17.
