By Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)
Finance Minister Mathias Cormann concedes that nobody knows what the iron ore price will be in four years despite it being a crucial element of budget forecasting.
Treasury and the Department of Finance will hand down an independent assessment of the budget on Friday as part of the Charter of Budget Honesty during an election campaign.
The Pre-election Economic and Fiscal Outlook comes little more than a fortnight after Treasurer Scott Morrison handed down his first budget, but already the volatile iron ore price has briefly dipped below its average forecast price of $US55 per tonne.
That was an upgrade from the $US39 forecast in the mid-year budget review but below the $US70 it soared to several weeks ago.
The prediction helps to assess the budget over a four-year period, but can add or wipe billions of dollars to revenue predictions and the budget bottom line if it’s wrong.
Senator Cormann insisted it was a technical assumption because it takes the average of the preceding four-week period of the budget and the mid-year review.
It will be the same for PEFO.
“Nobody knows what the price is over a four-year period,” he told reporters in Canberra on Wednesday.
Shadow finance spokesman Tony Burke said Labor always viewed the May 3 budget assumptions as “nothing short of heroic”.
“The government is only coming to terms with this because of the Charter of Budget Honesty, not because they were being realistic with their assumptions in the budget,” he told reporters.
Shadow treasurer Chris Bowen, in his budget-reply speech last week, said the iron ore forecast was more hope than a plan.
It would add $16 billion to the budget bottom line at the “stroke of a pen”.
Both major parties are spruiking 10-year plans and beyond the traditional four-year period of the budget.
Mr Burke acknowledged there was a limit to the longer projections, but remains confident of Labor’s fiscal forecast should it win the July 2 election.
“If you only ever take a short-term view, you won’t have the courage to make the structural changes that we need to have for the budget,” he said.
Mr Burke cited Labor’s planned superannuation and negative gearing changes as examples.
They would take time to flow-through to government revenue, but over 10 years they make a significant structural improvement to the budget.