CANBERRA, Australia - Falling iron ore and coal prices and easing demand from China have contributed to a widening of Australia's budget deficit.
The Treasury Department on Friday raised its estimated deficit for the current fiscal year to 30.1 billion Australian dollars ($26.8 billion). The new forecast for the year ending June 30, 2014 reveals a substantial deterioration in Australia's finances since May, when the Treasury Department forecast a deficit of AU$18 billion.
Treasurer Chris Bowen postponed his government's promise to return the budget to surplus by a year to 2016-17.
He outlined a plan to make up most of AU$33.3 billion shortfall in revenue forecast over the next four years through a new levy on bank deposits, public service cost-cutting, increasing taxes on tobacco and slowing the rate of increase in foreign aid.
Prime Minister Kevin Rudd is expected to set an election date as early as Sept. 7, and his centre-left Labor Party is widely expected to lose. His government was first elected in late 2007 and has failed to deliver a single surplus budget since then due to the global economic crisis.
Chinese demand for iron ore and coal, Australia's two biggest exports, helped Australia avoid recession during the crisis.
Bowen said while the boom in investment in new iron ore and coal mines had peaked, more mineral exports would flow as the new mines begin production.
But this new export phase in the resource sector would not provide as many jobs as the price-and-investment booms had in the past decade.
"Exporting minerals soaks up nowhere near as many workers as building mines," Bowen told reporters.
Economic growth for the fiscal year, forecast at 2.75 per cent in May, was downgraded on Friday to 2.5 per cent.
The unemployment rate forecast in May to rise to 5.75 per cent in the current fiscal year was revised up to 6.25 per cent. The latest figures show the Australian jobless rate crept from 5.6 per cent in May to 5.7 per cent in June.