Chris Richardson, from Deloittte Access Economics, has warned Australians, in his budget monitor on Monday, to expect the next budget to be a horror story.

Prime Minister Tony Abbott and Federal Treasurer Joe Hockey have been at pains to soften up the electorate before the budget speech. Both men are working hard to mitigate any anxiety prior to its release. But circumstances, according to Mr Richardson, will force their hand.

The still free-falling iron ore price has fuelled speculation of a revenue downgrade. Slower than expected wages growth is reducing the expected funds collected through income tax. And “the rising cost of Senate gridlock … sees an underlying cash deficit stuck at $45.3 billion in 2015/16,”said Mr Richardson.

And this last represents a $14.1 billion black hole in the deficit forecast in the midyear budget review.

The budget for 2017/18, according to Mr Richardson, will be even worse – blowing out by $47 billion.

“We still see deficits as far as the eye can see,” Mr Richardson said on Monday, “With the repair task getting harder both because of economics – commodity prices and wages – and because of politics.

“If Australia’s politicians can’t craft some compromises, then better budgets will be even further away.

Mr Richardson blames two things for our current economic woes:

  1. The lackadaisical attitudes of Australian politicians when China’s demand for resources cocooned us in a “comforting layer of surpluses.”
  2. The decrease in wriggle-room created by permanent promises such as those for family payments, baby bonuses, compensation for carbon and mining taxes, and a series of personal tax cuts.

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