Aussie Treasurer promises update

Anthony Albanese, Quentin Bryce, Kevin Rudd and Chris Bowen. Photo / AP

Federal Treasurer Chris Bowen has promised to release a Budget update before the Australian election.

If nothing else, it will signal the start of the official campaign is not too far away.

Bowen confirmed this week he and Finance Minister Penny Wong would release an economic and fiscal statement taking into account changes to the parameters set out in the May Budget.

His predecessor, Wayne Swan, did the same in July 2010. Former Prime Minister Julia Gillard called the 2010 poll three days later on July 17.

This year's statement shouldn't be confused with the official pre-election economic and fiscal outlook - which is an independent Treasury and Finance departments assessment released within 10 days of the writs to dissolve Parliament.

Bowen has already given a few hints about what the Government's statement might say. He's described Swan's Budget settings - a return to balance in 2015/16 and a surplus in 2016/17 - as broadly right.

"It is the right strategy. I think it is justified in economic terms to stick to the plan of returning to balance and then surplus," he said last week.

The upcoming statement will include the impact to two major policy changes announced by Prime Minister Kevin Rudd on asylum seekers and carbon pricing.

The resettlement deal with Papua New Guinea is being costed and funded.

The plan to move faster from a fixed carbon price to an emissions trading scheme (ETS) is expected to cost A$3.8 billion ($4.4 billion) over four years. This is to be offset by saving measures such as changes to the fringe benefit tax deal for cars forecast to raise $1.8 billion.

The statement is also likely to reflect the impact of the Australian dollar, which has fallen dramatically against the US dollar since May.

The economic assumptions in the 2012/13 Budget were based on an exchange rate of about US$1.03c and a trade-weighted index (TWI) based on a basket of currencies of around 74 points.

This week the aussie was trading close to US93c, and an index of 71 points.

Reserve Bank of Australia research says a 10 per cent fall in the aussie can add about 1 per cent to inflation over three years. If so, the annual consumer price index forecasts are likely to be revised up from the 2.25 per cent forecast for the 2013/14 and 2014/15 financial years.

But it should also be noted the earlier move to an ETS - and a carbon price of about $6 a tonne rather $24-$25 - should take 0.5 percentage points off inflation.

Commonwealth Bank of Australia chief economist Michael Blythe expects the Government to downgrade its forecasts for gross domestic product (GDP).

"It would be surprising if they didn't cut their real GDP forecasts a bit," Blythe said.

Bowen recently attended his first G20 Finance Ministers meeting and his counterparts confirmed fears the world economy was facing "serious headwinds".

Rudd and Bowen have repeatedly said the mining boom is over.

- AAP