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Deficit forecast reaches $57.6b -

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Deficit forecast reaches $57.6b

Broadcast: 12/05/2009

Reporter: Ticky Fullerton

It is the biggest projected deficit in the nation's history and already the number crunching is
well underway from both sides of politics and the markets.

Transcript

TONY JONES, PRESENTER: This Budget contains the biggest projected deficit in the nation's history.
Already the number crunching is well underway from both sides of politics and the markets. Ticky
Fullerton reports on where the money's coming from.

WAYNE SWAN, TREASURER: Never before has a Government had to frame a Budget that includes a $210
billion write-down in revenue.

TICKY FULLERTON, REPORTER: The forecast deficit for next year is $57 billion, having blown out over
$20 billion since February. Growth will contract by 0.5 per cent and unemployment will hit 8.5 per
cent. So it's the Government's optimism about how fast it can return Australia to a humming economy
that has the Opposition questioning both the Government and the Treasury.

JOE HOCKEY, SHADOW TREASURER (on '7.30 Report'): It is casino economics that they're relying on.
... These Budget papers are actually Wayne Swan's Budget papers. He is assuming, he is assuming
that there will be above trend growth for the next seven years which is unprecedented.

KERRY O'BRIEN, 7.30 REPORT PRESENTER: Aren't they Treasury figures?

JOE HOCKEY: Well, I understand they - if they're Treasury then we got a lot of questions.

TICKY FULLERTON: Budget forecasts for the 2010-11 show a return to positive growth of 2.25 per
cent, and the next year the Government says growth will roar back to 4.5 per cent with inflation at
a very manageable 2 per cent.

WAYNE SWAN: These projections are very conservative if you look at these figures. They don't even
match the growth levels achieved coming out of the two previous recessions in this country, and
they come on the back of fairly sluggish periods of growth. So, we'll have an economy that'll have
a lot of spare capacity, and it's possible that in those circumstances you might be seeing figures
even better than that.

TICKY FULLERTON: The Reserve Bank provides some comfort for the Treasurer, forecasting a recovery
late this year, with signs of growth accelerating in China. The Government claims that it will be
in surplus by the year 2015-16.

STEPHEN WALTERS, JP MORGAN: To me there wasn't really any of the tough measures that I really
thought were needed to get the Budget back into surplus within a reasonable period of time. I think
it's basically a cross your fingers and hope for your best that the revenues just reappear as the
global economy picks up and as the Australian economy follows. So, it's not clear to me how that
strategy is credible.

TICKY FULLERTON: To tackle the rising unemployment and position the nation for all this new growth,
the Government is delivering its third stimulus package in eight months - $22 billion in nation
building. Most of that money will come from the three funds set up last year. Over $10 billion, the
lion's share of the building Australia fund; $2.6 billion from the education investment fund and
$3.2 billion from the health and hospitals fund.

WAYNE SWAN: It's the third phase of our stimulus strategy, and we know it's working.

JOE HOCKEY: They spend more handing out cash to people than they're actually spending on their
so-called nation building infrastructure.

WAYNE SWAN: The 8.5 per cent peak in unemployment would be 10 per cent if we did what Malcolm
Turnbull and the Liberals are suggesting, just to sit and to wait and to see.

TICKY FULLERTON: The past month's economic figures has given support to Government optimism: a
surprise fall in unemployment, a rise in business confidence and the bounce back of the share
market from the lows in March. But all these indicators are volatile. The question tonight is
whether what the Treasurer referred to as an unpopular Budget will deal out enough pain for it to
claw its way back into surplus.

Ticky Fullerton, Lateline.