The treasurer, Joe Hockey, is preparing to forecast budget deficits totalling about $100bn over four years and reveal deeper cuts to Australia’s foreign aid spending.



The government’s mid year economic and fiscal outlook (Myefo), to be released on Monday, is expected to contain gloomy news on unemployment and will confirm significant revenue write-downs caused by weaker global demand and a large fall in commodity prices.

News Corp reported the projected budget deficit for the current financial year would be more than $40bn, up from $29.8bn in the May budget.

Myefo is expected to project deficits totalling $100bn over four years, up from the $60.3bn predicted in May.

Hockey also told News Corp the government would make further cuts to foreign aid. These saving are expected to be worth about $1bn each year, totalling $4bn over the budget cycle.

The government had already targeted the foreign aid budget for the biggest single saving measure in the May budget. That earlier $7.6bn cut from budgeted foreign aid spending did not require specific legislation.

In the lead-up to Myefo, Hockey has been preparing the ground for significant revenue write-downs and a delay to the return to surplus.

He said on Sunday the document would reveal the biggest fall in Australia’s terms of trade in more than 50 years. In explaining why he would not make further deep cuts to domestic spending, Hockey said the budget needed to act as a “shock absorber” to safeguard jobs and prosperity.

Labor has accused Hockey of hypocrisy given his strong criticisms of the former Gillard government over revenue write-downs.

The shadow treasurer, Chris Bowen, said he would not play the “silly game” of blaming Hockey for the falling iron ore price, but vowed to hold the treasurer to account for the impact of his budget policies on consumer confidence and employment.

“His blunders and his bluster, his words and his actions, have affected the real economy,” Bowen told the ABC.

The finance minister, Mathias Cormann, said the budget faced “significant global economic headwinds”. The government would make cuts to offset spending decisions but would not make cuts to account for the fall in revenue.

Cormann rejected the claims of hypocrisy.

“Labor was saying we were deliberately taking a too pessimistic view to make the numbers look worse than what they were and of course as it turns out we weren’t aggressive enough in downgrading the revenue assumptions that we inherited from Labor,” he told the ABC on Monday.

“Furthermore, we are of course, making the difficult but necessary decisions to get spending under control so the situation is quite different.”

The assistant social services minister, Mitch Fifield, told Sky News the budget update should be a “wake up call for the Australian Labor party” to pass the savings measures currently blocked in the Senate.



But Bowen said Hockey had still included the “unfair cuts” in the budget bottom line even though they could not pass the parliament.

