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Fed: More grim economic news as political battle heats up

By Kate Hannon, National Political Editor
02 Feb 2009 7:36 PM

CANBERRA, Feb 2 AAP - The suspicion that Australia's economic outlook is far worse than publicly acknowledged became a reality with a sickening thud on Monday.

Back in November, the Mid-Year-Economic and Fiscal Outlook revealed a $40 billion hole in government revenue over the next four years but the surplus was still intact as a straitened $5.4 billion.

On Monday, the black hole trebled to $115 billion with Prime Minister Kevin Rudd delivering the grim news and flagging the certainty of a "temporary" deficit tipped to be around $14 billion.

Just how big the deficit will become depends in part on the second economic stimulus package expected to be announced mid-week.

After consultation with business, unions, community groups and state government leaders, the package could include some big-ticket infrastructure projects, money for skills training and apprentice retention, and possibly tax cuts for low-income earners.

Flanked by his two senior economic ministers, Treasurer Wayne Swan and Finance Minister Lindsay Tanner, Mr Rudd pledged to "move heaven and earth" to stem the anticipated rising tide of unemployment.

A late afternoon meeting of the Labor caucus members, back in Canberra preparing for parliament, brought forth a raft of questions from concerned MPs about tax incentives, job protection, credit to safeguard small business cashflows and regional infrastructure.

In announcing the news, Mr Rudd ramped up his attack on the opposition, continuing to paint leader Malcolm Turnbull as some kind of neo-con in favour of the kind of rapacious capitalism that caused the world credit crunch in the first place.

Labor would not "let the markets rip" like their predecessors but would intervene like all good governments should.

While pushing Mr Turnbull and the Liberals as hard as they can into the camp of Ronald Reagan and Margaret Thatcher, Mr Swan had the gall to accuse Mr Turnbull of playing politics over his plea for a cooperative approach to the economic crisis.

Mr Rudd accused the Liberals of fence-sitting and playing short-term opportunistic politics.

"Mr Turnbull's alternative is frankly one of a rolling political frolic," Mr Rudd declared.

Round two will begin in Question Time on Tuesday.