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Strewth! Could Australia be heading for early elections?

Sydney, Australia
Onfokus | iStock/Getty Images Plus
Sydney, Australia

Just three months after Australia received its fifth prime minister in as many years, calls are already abound for early federal elections.

Voting to elect officials to the House of Representatives and Senate, which make up the Parliament of Australia, are widely expected to occur around September or October next year but a higher-than-expected budget deficit forecast could push the date to early 2016, according to Goldman Sachs.

The Treasury Department's Mid-year Economic and Fiscal Outlook (MYEFO) for 2015-16 on Tuesday revealed the deficit could hit A$37.4 billion [$27.1 billion], or 2.3 percent of gross domestic product (GDP). That's higher than the A$35.1 billion forecast in May.

"Ultimately, it is this accumulation in debt and the ongoing risks to economic growth in 2016 that risks a federal election occurring in early 2016," Goldman Sachs economists said in a Tuesday note.

"The MYEFO shows clearly that Australia's attempts at fiscal consolidation continue to prove elusive in the face of commodity price deflation, weak economic growth and an obstructionist Senate."

Economists across the board widely agree that balancing Australia's public finances is one of the government's top obstacles. Among nations with a triple-A sovereign rating, Australia has experienced the largest increase in net government debt since 2008.

"Over the next four years, the cumulative budget deficit is expected to be $26 billion larger than forecast in the May budget. A budget surplus is beyond the forecast horizon," said HSBC economists in a report, adding that the MYEFO reveals the magnitude of the task the government faces.

Speaking to CNBC on Tuesday, finance minister Mathias Cormann defended the government's efforts at bringing costs down.

"The budget position over the forward estimates continues to improve; the deficit is expected to decline because we've been able to control expenditure. Spending is about $13.3 billion less in this forward estimate period than had been anticipated in May."

Officials are considering privatizing the government-owned Australian Rail Track Corporation, which manages the country's interstate rail network, to see if that could help resolve the deficit and free up government revenues, he added. Australia has already sold off several state assets in recent years, such as the initial public offering of Medibank Private Health Insurance in 2014.

Early election benefits

With Christmas Eve marking Prime Minister Malcolm Turnbull's first 100 days in office, some pundits say an early vote will ride the wave of his recent victory. But a new poll indicates the 61-year old's popularity may be on the decline. Satisfaction with Turnbull's performance fell eight points to 52 percent since the last fornight, according to a Newspoll survey published last week.

Still, Goldman Sachs believes advancing the election date holds more pros than cons.

The world's thirteenth-largest economy will be able to avoid a "politically corrosive" nine-month period of debating potential tax changes and provide more scope to undertake remedial fiscal work, the bank explained.

If the government goes ahead as planned in late 2016, that could further weaken economic growth, trigger an upwardly revised deficit and see rating agencies formally issuing a warning on Australia's sovereign credit rating, it added.

So far, Turnbull's administration has dismissed the prospect of an early vote.

"I cannot imagine that we would be having an election [on February 14] unless the Australian people are wanting to send a valentine to Prime Minister Malcolm Turnbull," Foreign Affairs Minister Julie Bishop told local news media last month. "I expect the Government will serve out its full term and there will be an election later next year."

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