CANBERRA, Dec. 16 (Xinhua) -- The Australian government has slashed its budget surplus projections by almost half.
Treasurer Josh Frydenberg on Monday delivered the mid-year economic and fiscal outlook (MYEFO), forecasting a surplus of 5 billion Australian dollars (3.4 billion U.S. dollars) for financial year 2019/20 - down from 7.1 billion Australian dollars (4.8 billion U.S. dollars) previously promised by the government.
Surpluses over the next four financial years are now expected to total 23.5 billion Australian dollars (16.1 billion U.S. dollars) - down from the 45 billion Australian dollars (30.9 billion U.S. dollars) projected in the federal budget, which was delivered by Frydenberg in April.
The revised projections are the result of a significant revenue writedown of 32.6 billion Australian dollars (22.4 billion U.S. dollars) over the next four years, which Frydenberg blamed on "weak momentum in the global economy" and "the devastating effects of drought and bushfires."
The Australian economy is now expected to grow by 2.25 percent in 2019/20, down from the 2.75 percent projected by the Treasury in April.
"Our devastating drought has already taken a quarter of a percentage point off GDP growth and reduced farm output by a significant amount over the last two years," Frydenberg told reporters on Monday.
"Global trade tensions have weighed heavily on consumer and business sentiment, with forecasts for global economic growth and that of our major trading partners downgraded in today's MYEFO."
According to MYEFO Australia's net debt will grow to 392.3 billion Australian dollars (269.9 billion U.S. dollars), or 19.5 percent of GDP, by June before declining steadily to 1.8 percent by 2029-30.
It said that unemployment will fall from 5.25 percent to 5 percent in 2020 - above the 4.5 percent the Reserve Bank of Australia (RBA) has said is required to drive wage growth.
Under current circumstances wage growth has also been revised down from 2.75 percent to 2.5 percent.
Finance Minister Mathias Cormann stressed that wage growth would continue to outstrip inflation growth.
"Disposable incomes are growing at their fastest rate in more than 10 years and we remain on track to return to surplus this financial year," he said.
"That is even after significant revenue write-downs, after legislating significant income tax relief, after continuing to provide record funding for the essential services Australians rely on, and after the additional investment into key priority areas in this budget update."
The ruling coalition built its successful re-election campaign on the economic credentials of Frydenberg and Prime Minister Scott Morrison, who previously served as Treasurer.
If the government delivers a surplus this year, it would be the first one in 12 years for a federal budget, according to the Australian Broadcasting Corporation.
Jim Chalmers, the opposition Labor Party's treasury spokesman, on Monday said that the update was a "humiliating admission" that the economy has deteriorated under the ruling coalition.
"Today's mid-year economic and fiscal outlook has destroyed the economic credibility of the Morrison government," he said.
"Australians are paying a high price for the Liberals' incompetence which has delivered weaker economic and wages growth, skyrocketing living costs, higher unemployment and record high household and government debt.
"This outlook is a missed opportunity to turn the economy around and address our longstanding but increasingly urgent challenges - including weak consumption, stagnant wages, falling productivity and high underemployment."