Surplus in 2012/13 may be one-off

September 24th, 2010 | by Velma Orr |

The federal budget is at risk of returning to deficit in 2013/14 after the much touted surplus in 2012/13, because commodity forecasts are too optimistic, an independent forecaster says.

While Access Economics expects revenues will total some $6 billion more than official forecasts over this financial year and next, it believes high commodity prices are unsustainable.

“Despite all the hoo-ha by politicians over the ‘return to surplus’, we see the five minutes of fiscal sunshine before re-emergence of a deficit,” Access Economics director Chris Richardson says.

Releasing his updated Budget Monitor on Tuesday, Mr Richardson forecast a near $2 billion deficit in 2013/14, but stressed this wasn’t due to recent policy costs – neither the election campaign nor the “undignified scramble” for a parliamentary majority which followed it.

“These costs are tiny compared to the overall budget,” he said.

“Rather, the projected descent back into deficit is due to the Access Economics’ forecast that commodity prices will lack the oomph currently projected in the official estimates.”

He said Treasury may be right that there was a permanent boom in mining, but it would be the first ever recorded in any market.

The strength of the demand surge out of emerging economies so far has run well ahead of the increase in global mineral supply, providing continuing strength for commodity prices, and a lift to Australian revenues.

“But if the emerging economies take a temporary tumble, or if the world’s miners dig deep enough to start to catch up with the burgeoning demand of China and India and others, then the budget will look very little like it does today,” Mr Richardson said.

Access Economics is forecasting a budget deficit of $37.3 billion in 2010/11 compared with Treasury’s predicted $40.7 billion shortfall, while for 2011/12 it sees a deficit of $7.8 billion versus the official $10.4 billion projection.

“The picture becomes muddier by the time we look forward to 2012/13, and by the time we reach 2013/14, we see the black ink returning red again,” Mr Richardson said.

Access expects a surplus of $3.8 billion in 2012/13 compared with an official forecast of $3.5 billion, but a $1.8 billion deficit in 2013/14 against Treasury’s expected $4.5 billion surplus.

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