The deficit threatens to reach $100 billion over the next three years, the Finance Minister, Lindsay Tanner, has warned, throwing into deeper doubt prospects for paid maternity leave and extra cash for universities in next month's budget.
As the Government unveiled measures yesterday to counter unemployment and protect the mortgages of jobless people, Mr Tanner talked down expectations of a recovery in the world economy next year as "jumping the gun".
This week about nine million people will start receiving payments of up to $900 as part of the second round of stimulus measures designed to shore up the sagging economy.
However, Mr Tanner moved to stem demands for more spending, playing down speculation of a third financial stimulus and warned of the "very serious challenge" Australia faced in terms of budgetary restraints.
The Government is projecting deficits totalling nearly $100 billion over the next three years, "and there's every chance that that figure will be revised upwards", Mr Tanner said.
Asked about reports the Government was framing the budget on the basis of a world recovery next year, he told the Nine Network: "I think that's jumping the gun somewhat."
The projected deficit was sustainable, "but we cannot afford to allow those kinds of deficits to continue indefinitely, because, if we do, then we will get into serious economic problems", Mr Tanner said.
He acknowledged that paid maternity leave and more funding for higher education and innovation were among the areas where it was "a lot harder" than anticipated six to nine months ago to cater for in the budget, although he was not suggesting they were off the table.
On the need for more stimulus measures, Mr Tanner said there was now "a very large amount of stimulus" in the economy.
"There is a lot of money flowing, both by cuts in interest rates and through the Government's packages and, of course, the money flowing from the second package is really only just starting to get moving".
There was also the cash being injected into new homes, school grants and housing insulation, and there would be significant tax cuts from mid-year.
"But I would not rule out further stimulus. We have always taken the position that whatever is required to sustain jobs, to sustain economic growth, will be done," Mr Tanner said.
The shadow treasurer, Joe Hockey, told Network Ten that the Coalition could oppose further stimulus measures contained in the budget.
It opposed waste and mismanagement, and the Government was now borrowing $2.2 billion a week to fund itself, he said.
The public might think the Government was doing a good job by handing out money.
"But we are experienced in government. We know you have to at some time pay off Labor's debt, and we know that the cash splash is not generating jobs."
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