Joe Hockey has defended his unpopular budget measures as “essential” to prevent “intergenerational buck-passing” over debt and ensure Australia is prepared to cope with economic shocks and the ageing population.



In a speech to parliament on Thursday, the treasurer acknowledged the nation faced “many challenges” including weaker global demand and a considerable fall in commodity prices – preparing the ground to reduce revenue forecasts in his forthcoming budget update.

Hockey reaffirmed his determination to push ahead with those budget measures that are yet to be legislated, saying the economy would “drift” without continued pursuit of economic reform. But he said the nation should be optimistic about the prospects of continued growth.

Hockey delivered his economic statement a day after national accounts figures showed lower than expected growth.

Labor used parliamentary question time to challenge Tony Abbott over broken election promises, but the prime minister accused the opposition of “trashing our country” and committing “intergenerational theft” by blocking budget savings.

Hockey, who is preparing to release the mid year economic and fiscal outlook (Myefo) within a fortnight, said the national accounts figures reiterated “the need for Australia to work hard for future economic growth”.

Warning that “complacency is our enemy”, Hockey said Australia had enjoyed 23 consecutive years of economic growth but would not achieve prosperity and high living standards “with a policy to do nothing about our future”.

“Yesterday’s national accounts highlight an Australian economy continuing to grow, and an economy transitioning from a mining boom to one with broader-based growth,” he said.

“This is an adjustment that we expected. Going forward, there are reasons to be optimistic about continuing economic growth.”

Hockey said retail sales figures had risen for the fifth consecutive month, job vacancies were at a 20-month high, and export volumes continued to increase.

“Yes, we face many challenges. We are feeling the headwinds of weaker global demand, which has led to the considerable fall in commodity prices,” he said. “Iron ore represents around a fifth of our export income … and prices have fallen by more than 30% since the budget. We have also seen falls in prices of other major commodities such as thermal coal and wheat.

“Despite these headwinds, the economy will continue to grow and jobs will continue to be created. But government revenues have been impacted by a larger-than anticipated decline in our terms of trade. This means the government will collect less in tax, which makes it harder to pay for existing government services.”

Hockey said softer wages growth also had a detrimental impact on revenue. These factors “made budget repair harder” but did “not alter its necessity”, he said.

Continued budget deficits would leave Australia “vulnerable to external shocks, less equipped to cope with the ageing population, and increasingly reliant on future generations to pay off our debt”.

“This intergenerational buck-passing is unfair,” Hockey said, attempting to recast the fairness debate about his budget measures.

The intergenerational report to be released early next year would explain the pressures on the budget over the next 40 years, he said. Labour force participation would fall as the population aged, the economy would slow, revenue growth would reduce, and there would be demand for more spending on health, aged care and pensions.

Hockey said changes to welfare payments and other structural budget savings were designed to ensure the financial impact was “relatively small in the short term” but improved the bottom line in the medium and long term.

He referred to the push to deregulate university fees and cut course subsidies, saying the measures that were blocked in the Senate this week were essential. “They do not only deliver better quality education services for Australians but they provide our campuses with the opportunity to capitalise on massive growth across the region,” Hockey said.

He said the services industries represented 70% of the Australian economy, but represented just 17% of all its exports, highlighting opportunities for growth in the Asian century underpinned by recently signed free trade agreements.

Hockey also pointed to the government’s infrastructure spending, and incentives for state governments, as evidence of efforts to support economic growth.

The shadow treasurer, Chris Bowen, said the way to make the case for reform was not to divide Australia into “lifters” and “leaners”.

Bowen said the government had adopted unfair and regressive budget measures, including removing the low-income superannuation contribution and stripping people aged under 30 of income support for six months each year.

He said Labor rejected “economic reform based on unfairness” but instead wanted to achieve inclusive growth. “We agree on the end: continuing those 24 years of uninterrupted economic growth – economic growth lifts people out of poverty and turns aspiration into reality,” Bowen said.

“But we disagree on the method. The treasurer says the way to protect our economic growth record, our living standards, is to embrace his budget, which to our way of thinking is a fundamentally unfair document. He effectively says the way to protect Australia’s living standards is to attack Australia’s living standards through the budget.”

The government has indicated it will not try to make additional spending cuts to make up for revenue writedowns in Myefo, a decision that reflects concern about the potential impact on growth. But the government is seeking to make savings to offset spending decisions made since the May budget, including the $630m funding boost for national security agencies.

The budget predicted an underlying cash deficit of $29.8bn this financial year, improving to a deficit of $2.8bn in 2017-18 with the books reaching balance in 2018-19.

The finance minister, Mathias Cormann, said the government would “deliver a surplus as soon as possible” but “circumstances have changed somewhat since the budget” including the loss of revenue from falling commodity prices.