Australia's budget deficit will far exceed its previous estimate during the fiscal ending June 30, 2015, Treasurer Joe Hockey said in the Mid-year economic and fiscal outlook released Monday.

The government estimates the underlying cash deficit to reach A$40.4 billion in 2014-15 before narrowing to A$31.2 billion in 2015-16.

The 2014-15 deficit was revised from A$29.8 billion shortfall predicted in May. The revision primarily reflects sharper-than-expected falls in iron ore prices and lower-than-forecast wage growth. Moreover, tax receipts were revised down and government payments increased further.

Company tax receipts have been revised down by A$2.3 billion in 2014-15 and by A$14.4 billion over the forward estimates. In addition, the weaker outlook for wage growth is expected to lower the tax receipts from individuals by A$2.3 billion in 2014-15.

The budget deficit is forecast to narrow to A$11.5 billion in 2017-18. This highlights the size of the budget repair task and that there remains much work to do, the Treasurer said.

"The Government remains committed to budget repair and to successfully negotiating the structural reform measures announced in the 2014-15 Budget through the Parliament," Hockey said.

The economy is forecast to grow at 2.5 percent in 2014-15, before increasing to near-trend growth of 3 percent in 2015-16. GDP estimates were left unrevised.

The below trend real economic growth continues to mean that employment growth has not been strong enough to keep up with growth in the labor force. Nonetheless, the unemployment rate is now expected to peak at 6.5 percent.

Inflation is projected to be 2.5 percent, consistent with the Reserve Bank of Australia's medium-term target band. The terms of trade is forecast to continue to decline, falling to its level in 2005-06 by 2019-20.

RTTNews