Picture: Thinkstock Source: National Features
LABOR will go to the election with its budget still in the red, economists say.
The Government is already on course to deliver a $10 billion plus deficit this financial year and economists believe the May budget will reveal yet another deficit for 2013-14, albeit a slightly smaller one.
They say it doesn't matter too much, however, so long as there is a credible plan in place to get the budget back to black in the long term.
And while the Coalition has promised to deliver bigger and earlier surpluses, economists want to see more details.
Of eight private sector economists surveyed by News Limited, all expect a budget deficit this year, of between $16 billion and $5 billion. The average guesstimate was a deficit of $11 billion.
For the 2013-14 year which will be the real focus of the upcoming May budget six out of eight economists expect another deficit, of between $12 billion and $3 billion. One believed the budget would be in perfect balance, one in surplus. But the average response was a deficit of $4 billion.
Running counter to the tide, Macroeconomics' Stephen Anthony said he expects the budget deficit to grow in size from $10 billion this year to $12 billion the next.
But AMP Capital chief economist Shane Oliver cautioned against worrying too much about the budget being in deficit.
"Australia's public finances are pristine by global standards and as long as the budget deficit is continuing to shrink noticeably from this year's 1.5 per cent or so of gross domestic product, Europe is around 6 per cent, the US around 8 per cent and Japan around 10 per cent, then I think that will be ok."
"However, it is important that the Government be able to demonstrate that a surplus will be achievable in the next few years as we do need to start putting money aside for the next rainy day."
Dr Oliver is tipping a deficit of $15 billion this year, but a smaller deficit of $5 billion in 2013-14. He predicted an Abbott government would deliver a smaller deficit next financial year.
"I expect that an Abbott-led government would more aggressively cut spending in its first year," Dr Oliver said.
However, HSBC Australia chief economist Paul Bloxham said the size of the deficit would be largely determined by the economy. He expects a return to balance in 2013-14.
"Assuming the global economy improves as we expect in 2013-14, we should see the budget moving back to surplus by then," he said.
ANZ economist Ivan Colhoun also expects a smaller deficit from an Abbott government, but wants to see the detail.
"While the Opposition has made this claim and stated that this is their policy, so far, they seem to be abolishing a lot and delivering few details of how this will be funded (apart from public sector job cuts, fewer refugee places and school kids bonus)."
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