Australia drops budget surplus plan

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Wayne Swan REUTERS Australian Treasurer Wayne Swan.

Australian Treasurer Wayne Swan on Thursday conceded for the first time he was unlikely to deliver a budget surplus this financial year, a backdown the opposition called “humiliating”.

Earlier this year, Swan declared the “deficit years of the global recession” over and since then he has insisted a surplus was on the cards, despite plunging commodities prices sending clear signs that all was not well.

The government of Prime Minister Julia Gillard had forecast a surplus of Aus$1.1 billion (US$1.15 billion) for 2012/13, hoping to salvage its flagging popularity among voters with an election due next year.

Swan's climbdown came after the Finance Department's latest monthly statement showed tax revenue in the first four months of the financial year was down Aus$3.9 billion on expectations.

“That's a really big hit to revenue, it's a huge whack to revenue,” Swan told reporters.

“Obviously dramatically lower tax revenue now makes it unlikely that there will be a surplus in 2012/13.”

He said volatility in the global market, combined with lower commodity prices and the high Australian dollar had created a “very unusual” situation.

“That unusual combination of events has weighed heavily on our revenues, particularly our business tax revenues,” he said.

Swan declined to speculate on the magnitude of any deficit.

“At the end of the day, I don't care about the political outcomes, I care about the economic outcomes,” he said.

“And the responsible course of action here in terms of the economic jargon is to let the automatic stabilisers work on the revenue side of the budget.”

The conservative opposition said it was another broken promise.

“What this demonstrates is you just can't trust this government to manage the economy and you just can't trust this government to tell the truth,” opposition leader Tony Abbott said.

In the May budget, Swan announced the surplus plans funded by deep cuts to defence and foreign aid spending.

He vowed an ambitious Aus$33.6 billion in savings, slashing Aus$5.5 billion from military spending and trimming Australia's overseas aid by Aus$2.9 billion, along with a raft of other reforms to tax and welfare benefits. - Sapa-AFP


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