The Australian government forecast its largest budget deficit on record of 57.6 billion Australian dollars (US$44 billion) as it struggles to offset a fall in revenue while lifting spending.

The forecast deficit for the fiscal year ending June 30, 2010, is 4.9% of gross domestic product, which would be larger than deficits in Australia’s two previous recessions in the early 1980s and early 1990s. It would also be almost double the current fiscal year’s deficit forecast of A$32.1 billion

The shortfall deficitgovernment expects China, Australia’s biggest trading partner, to emerge from a slowdown to once again boost the Australian economy. The government said that a return to double-digit growth in China is unlikely anytime soon, but China can be expected to grow by 8% in 2010 and 8.5% in 2011.

Melinda Cilento, chief economist at the Business Council of Australia, told Business Spectator that the budget takes important steps towards repositioning Australia.

Ms Cilento said the budget correctly targets infrastructure spending rather than cash handouts, but warned that the government will have to back up the measures with tough successive budgets.