Joe Hockey is expected to reveal a 2014/15 deficit of 35 billion dollars at his Fiscal Outlook announcement.
FOREIGN aid will be slashed to save almost $4 billion as the Government tries to get the Budget under control.
Treasurer Joe Hockey will release the Mid Year Economic and Fiscal Outlook today, and has warned bigger deficits, new spending and more cuts will be included.
The economic situation has deteriorated due to a 30 per cent drop in iron ore prices, a stagnating global economy, and some savings measures being blocked in the Senate.
Economists have warned that the deficit could blow out from the expected $30 billion by around $5 billion and Mr Hockey says deficits will now continue beyond 2018.
The $3.7 billion savings will come from Official Development Assistance over four years as the Government returns the $4 billion a year fund to 2007-08 levels.
Treasurer Joe Hockey holds a press conference at the Commonwealth Parliamentary Offices in Sydney ahead of the budget update yesterday. Picture: Britta Campion
Mr Hockey said they were unhappy making the cuts but were forced to do so, and that the economic statement was a "shock absorber" for the falling export prices.
"We don't like having to do this on foreign aid, but we have offset all of our new spending," he said yesterday.
"That includes funding critical national security to keep Australians safe."
Mr Hockey is blaming Labor for locking "irresponsible promises" into the Budget.
An Afghan child pushes a wheelbarrow carrying his brother in the outskirts of Herat. Afghanistan is still extremely poor and remains highly dependent on foreign aid.
"These are Bill Shorten and Tanya Plibersek's cuts," he said.
"They were irresponsible and reckless and now they have to help clean up the mess."
The MYEFO will include savings of $500 million through scrapping government agencies and committees and cutting public sector jobs.
It will also outline an increase in unemployment and a $3.5 billion blowout in welfare spending.
Opposition treasury spokesman Chris Bowen said Mr Hockey was "full of excuses".
"Of course there's been a decline in iron ore prices but there's also been a collapse in consumer confidence, business confidence and rising unemployment on his watch," he said.
"Why? Well firstly you see the Government's unfair cuts to family budgets, impacting on consumer confidence, and, importantly, the Australian people knowing that the Treasurer's just not up to the job that impacts on confidence."
Mr Hockey should "walk away from his Budget and start again, admit he got it wrong", he said.
Mr Hockey said growth would stay around 2.5 per cent but would then increase to 3 per cent.
"We expect unemployment to continue to grow, obviously, to levels that are a tick higher than what we forecast in the Budget, but this year we have seen a significant improvement in job creation," he said.
"This year we have seen job creation run at three times the speed of last year … if we had the same settings as the last year of the Labor Party in Government, unemployment would be at over 7 per cent and more than 110,000 Australians would not be in a job."
Mid Year Economic and Fiscal Outlook: What we know
· No Budget surplus in foreseeable future, and bigger deficits across the forward estimates
· $3.7 billion cut from foreign aid
· Childcare and family welfare payments to rise by $3.5 billion
· 175 Government agencies to be axed
· Growth about 2.5 per cent increasing to 3 per cent
· Increase in unemployment figures
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