Treasurer Joe Hockey has warned of Australia's deteriorating budget situation. Photo: Alex Ellinghausen
Treasurer Joe Hockey has let slip that the government debt could rise to more than half a trillion dollars - a figure that exceeds previous expectations by some $50 billion.
It comes days after the Coalition resolved its standoff over the debt ceiling, with the Greens voting with the Abbott government to abolish the self-imposed limit on government borrowing.
Mr Hockey is expected to reveal the new peak debt figure of more than $500 billion in next week's Mid Year Economic and Fiscal Outlook, which the Abbott government has framed as an ugly set of financial figures that will be blamed entirely on Labor.
The Treasurer had recently indicated that Australia's debt would peak at about $450 billion.
But in a speech in Parliament on Tuesday, Mr Hockey said the Coalition had inherited from Labor "endless deficits, debt that exceeds half a trillion dollars and . . . an economy with falling terms of trade".
Asked on Wednesday morning whether Mr Hockey stood by his statement that debt would exceed $500 billion, a spokesman said: "The Treasurer is not commenting further. Next week's release of the Mid-Year Economic and Fiscal Outlook will reveal the full extent of Labor's legacy of debt."
While Mr Hockey will blame the MYEFO figures on Labor, several recent decisions by the Abbott government have contributed to the worse than expected debt and deficit numbers.
Most notably, Mr Hockey recently authorised a payment of $8.8 billion to top up the Reserve Bank's funds, which Labors claimed was unnecessary.
The Treasurer confirmed that he would release MYEFO next Tuesday with a speech at the National Press Club.
It is not a mini budget – which will reveal the state of the books – but an update on headline figures such as growth and unemployment.
It is understood the deficit could exceed $40 billion - more than double the $18 billion deficit announced by former Treasurer Wayne Swan in the May Budget and about $10 billion worse than the deficit forecast by Labor during the election campaign.
The Coalition will not reveal the full extent of its cuts until in the May budget after the government has considered the recommendations of the Commission of Audit.