Budget update to beat gloom

THE federal government will release its midyear budget update next week, prompting accusations it is bringing the document forward to avoid factoring in worsening revenue predictions and jeopardising its promised surplus for this financial year.

It is believed the midyear economic and fiscal outlook will be released as early as Monday, more than a month earlier than last year's release on November 29.

The Reserve Bank of Australia minutes published yesterday contributed to the downbeat assessment of the economic outlook, a scenario that paves the way for more rate cuts.

The government has promised to return the budget to surplus this financial year but is having to make more cuts because the economic outlook has worsened since the May budget and the cost of handling asylum seekers has blown out.

The Age understands university research grants valued at $240 million are at risk after the government put on hold this year's grants round. So-called discovery grants in fields including science, economics and medicine are normally announced in late October. Informally, academics have been told not to expect announcements this year and that next year's round is also on hold.

Yesterday, during Senate estimates hearings, George Savvides, the head of Medibank Private, the government-owned health insurer, confirmed Medibank was set to hand the government a $300 million special dividend, the second such payment in three years.

Other areas that have been subject to speculation about savings include superannuation and a 25 per cent increase in tobacco taxes.

The government is sticking to its surplus promise despite falling revenues, declining commodity prices and an uncertain global outlook.

The May budget predicted a slender surplus of $1.5 billion for this financial year compared with a $47 billion deficit the year before.

Shadow finance minister Andrew Robb said releasing the midyear statement early would avoid the forecasts being based on assumptions more downbeat than they were at present.

''Releasing it this early will be a cynical snow job to disguise the anticipated haemorrhaging of tax revenue resulting from softening commodity prices and terms of trade,'' he said.

''It's not a half-yearly forecast, it's a quarterly forecast. They've brought it so far forward it's meaningless.''

He pointed to yesterday's RBA minutes, which noted that despite a small recovery in commodity prices, mining investment was likely to peak earlier and at lower levels than previously forecast.