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Govt lets slip on end of recession -

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PETER CAVE: The Federal Government has released its official projections for the end of the

The exact figures will be in the Budget in two weeks but in a letter sent to his state and
territory counterparts, the Federal Treasurer has revealed that the economic comeback will begin
late next year or early in 2011.

There'll be a weak start to the recovery but in the following two years, the Budget will project a
strong bounce in growth and falling unemployment.

It's a faster revival than suggested by the International Monetary Fund. Last week its economic
outlook stated that the world-wide recovery is expected to be sluggish.

From Canberra, Emma Griffiths reports.

EMMA GRIFFITHS: With two weeks until Budget day, the Federal Treasurer Wayne Swan has revealed
there'll be a change to the way the Government delivers its economic forecasts.

WAYNE SWAN: The most important thing we are doing is providing more accurate, more contemporary
information. We are in extraordinary times. We are in the middle of a global recession. The
forecasts do need to reflect that.

EMMA GRIFFITHS: So this time, the Budget will provide the official predictions for an extra year -
the 2010/2011 financial year.

Forecasts for that year would not normally be included. Normally for the second year out of a
Budget the forecasts would be for a standard expectation of trend growth.

But this time there will be detailed treasury forecast and it will show growth below the trend -
set at 3 per cent. It will show some growth though, and that's the important point for the

It'll reveal that the way out of recession will begin at the end of next year or early in 2011.

The growth will be faint but it will be there.

And it'll allow the Government to show an economic comeback as it nears the next federal election.

But Wayne Swan says that's not the motivation.

WAYNE SWAN: We are trying to be accurate. We are trying to provide the public with as much
information as possible to keep them informed. Many other countries adopt this approach. To do the
opposite, to stay with the traditional methods in the middle of a global recession, that would be
the inaccurate thing to do.

EMMA GRIFFITHS: The projections for the following two years will show a rapid return to growth with
above trend figures lifting Australia out of recession and putting Australians back into work.

Last week the International Monetary Fund laid down a slower chart to recovery, arguing the
severity of the downturn means the revival will be much slower than it had been out of previous

The Opposition says the Government has changed its methodology to suit its political needs.

EMMA GRIFFITHS: Shadow Treasurer Joe Hockey.

JOE HOCKEY: Treasury couldn't get the figures right for a 12 month forecast let alone to get
forecasts and projections right over four years and the economy is changing so dramatically that
any attempt by the Government to lay down an economic recovery strategy by changing the
methodology, sends a very bad message to Australians that you can't trust what the Government says.

EMMA GRIFFITHS: But Chris Richardson from Access Economics supports the change.

CHRIS RICHARDSON: Treasury has a standard way of doing it but it wants to switch from the standard
because this won't be a standard Budget or a standard outlook. Right now it's recession. At some
stage a couple of years out its recovery. It makes sense for Treasury to map that pattern more

EMMA GRIFFITHS: Access Economics has just released its own forecast and it's not pretty.

It predicts a deficit of $50-billion and as many as one-million people out of a job by the end of
next year.

Wayne Swan's not disputing it.

WAYNE SWAN: The Access report certainly demonstrates the brutal impact on government revenues and
the consequence of that is a higher temporary deficit.

We've already written down revenues between the May Budget and February by $115-billion and Access
Economics is now talking about a further loss to national income of something like $40-billion
arising from lower company profits and lower commodity prices.

There's no doubt that the outlook for revenue is bleak.

EMMA GRIFFITHS: Chris Richardson says Australia should brace for some nasty decisions that have to
be made in the Budget.

He supports the tax cuts due to kick in this July but says there will have to be spending cuts too.

CHRIS RICHARDSON: The trouble for the Government is it needs to explain to people why it has to
spend more in the short-term and less in the long-term. More in the short-term because the economy
is in trouble and it needs support, but less in longer-term to repair the Budget and substantially
less at that. I mean both sides of politics promising boom time promises, you know tax cuts,
supporting the big spending increases of recent years.

That combination is unaffordable and there aren't enough rich people in Australian, aren't enough
people earning $150,000 and more to close that gap.

Middle Australia will feel the pain of Budget repair.

EMMA GRIFFITHS: The Treasurer has repeated the oft-repeated line of not ruling anything in or out.

WAYNE SWAN: It certainly means taking some very, very tough decisions in this Budget to protect the
national economic interest in the short-term, the medium-term and the long-term.

PETER CAVE: Treasurer Wayne Swan ending that report from Emma Griffiths.