It isn't the Easter gift Joe Hockey would have hoped for - a renewed tumble in the iron ore price.
The treasurer's May 12 budget preparations were upset even more with a stark warning from one of the world's largest investment banks to get the budget on a better course or risk losing the nation's triple-A rating.
"The budget is in chronic deficit and public debt is ballooning, seemingly unchecked," JP Morgan's chief economist in Australia Stephen Walters said in a new analysis.
The iron ore price dropped below $US50 per tonne, its lowest level in nearly a decade and a far cry from the $US185-plus it reached during 2011.
Commodity forecasters at Deutsche Bank predict Australia's biggest export earner could even fall to $US40.
In December's mid-year budget review, Mr Hockey slashed his iron ore forecast for 2014/15 to $US60 from US$95 at the time of the 2014 budget.
Treasury has estimated that every $US10 per tonne drop in the iron ore price shaves up to $A3 billion off the annual budget.
Such a drag on the budget coincides with some $30 billion of measures from last year still being stuck in the Senate and the jettisoning of savings measures since the December review.
While Mr Hockey will face the same troublesome politics as last year in getting measures through the Senate, Mr Walters says senior government officials are also sending conflicting measures on the budget, not least Prime Minister Tony Abbott's prediction of a "dull" and "routine" budget.
"The loss of Australia's coveted triple-A sovereign rating is not imminent, in our view, but risks will grow without a change in trajectory," he said.
Australia is rated triple-A by the world's three major credit rating agencies - Standard & Poor's, Moody's Investors Service and Fitch ratings.
However, there could be a breakthrough on controversial changes to the pension.
Social Services Minister Scott Morrison says he is seriously considering a proposal from peak welfare body ACOSS to tighten eligibility for the part pension rather than indexing future payments to just inflation.
"We are engaged in a conversation with serious people who believe in trying to get a fairer and sustainable pension for the future," he told reporters in Sydney.
Opposition Leader Bill Shorten said the shift was the first chink in the government's armour and a recognition voters have rejected lower pensions.
Share
