Australia’s government forecast a wider budget gap this year as plunging iron ore prices erode tax revenue and spending cuts are blocked by opposition lawmakers.
The underlying cash deficit will deteriorate to A$40.4 billion ($33.2 billion) in the fiscal year ending June 30, 2015 from a May estimate of A$29.8 billion, Treasurer Joe Hockey said in the mid-year economic and fiscal outlook today. The government forecast unemployment will climb to 6.5 percent by mid 2015, higher than its May projection of 6.25 percent.
“We are now witnessing the largest fall in the terms of trade since records began in 1959,” Hockey told reporters in Canberra, referring to export prices relative to import prices. “This has been faster and deeper than anyone expected.”