Isn't "bugger" a bad word in their brand of English? Oh well, I guess conditions warrant it. At least this guy is calling a spade for what it is, a spade. Australian economy heading for meltdown, warns Access Economics Australian economy heading for meltdown, warns Access Economics | The Courier-Mail January 19, 2009 07:20am AUSTRALIA'S economy will "unwind scarily fast" this year with Treasurer Wayne Swan forced to choose between middle-class welfare and industry bailouts, a report claims. Leading economic forecaster Access Economics warns in its quarterly Business Outlook, released today, that the nation's economic boom will unravel , halving corporate profits, costing more than 300,000 people their jobs and blowing out the current account deficit to more than $100 billion. And Queensland is set to be hardest hit by a looming recession, as the collapse in the resource sector strangles our once booming economy and forces the state ``into the slow lane'' for several years. "Batten the hatches. This is not just a recession. This is the sharpest deceleration Australia's economy has ever seen," the report says. Thanks to China's growth, Australia last year escaped the recessions that sent major economies such as the US and Britain into reverse. The Government has consistently talked up the economy's prospects for 2009, citing Treasury forecasts of 2 per cent growth in 2008-09. But yesterday Wayne Swan acknowledged there was "no point gilding the lily in any way". "The year ahead will be tough, and there's no quick fix," the Treasurer said. The Access Economics report is the latest to challenge the Treasury forecasts for the Australian economy, released in November, before the full extent of China's slowdown became apparent. In an interview with The Weekend Australian, Mr Swan conceded neither the budget nor the economy would meet the official published forecasts. "China and other emerging economies, now caught up in this crisis, are expected to slow much more sharply than previously anticipated," he said yesterday. Access Economics director Chris Richardson said Mr Swan would already have more updated, unpublished Treasury forecasts that exposed the extent of the problems facing his budget. "The Government knows how ugly things are. None of this is a surprise to them," he said. Access Economics said the federal budget was "buggered" because of its heavy reliance on company taxes and royalties - both of which would be hit hard by the collapse in commodity prices. "The glory days of big budget surpluses are over, and the feds are now staring down the barrel of deficits as far as the eye can see," its outlook says. The total public sector deficit - which combines federal, state and local government balances - is forecast to blow out to $10.5 billion this financial year, mostly due to Canberra's stimulus package. But while Mr Swan may be able to rein in that deficit in 2009-10, the reprieve will be shortlived. Access Economics predicts that in the following year commodity price falls will exact a $22.8 billion toll from total government finances, which are dominated by the federal budget. The national fiscal deficit could blow out to $29.4 billion in 2011-12. Such a shortfall could cripple the Government's capacity to deliver promised tax cuts, maintain programs, cushion the cost of its emissions trading scheme and fund infrastructure spending plans. Access Economics warns that the Government and Opposition could "freeze in the headlights" as a result, choosing to shore up existing handouts to the middle class and to the car industry rather than making the politically difficult decision to cut them in favour of more worthy uses, such as building infrastructure. It says China's sharp downturn will impact heavily on the sun belt states of Queensland and Western Australia, with the slackening demand for resources draining them of economic strength. "Queensland may be in the unusual position of shrinking as a share of the Australian economy for a few years," Access Economics says. But it says all is not lost in Queensland with output growth still above the national average while our businesses still spend at a more rapid rate than other states. Queensland's population growth also remains "magnificent" while unemployment is low and the Bligh Government is still spending up a storm. It is the "future negatives" which will weigh heavily on our growth as the fall in commodity prices jeopardises many of our planned big projects. "The big fall in commodity prices is likely to mean many projects in the very large pipeline of possible works may never see the light of day."