Aussie budget locks in a surplus next year

The biggest savings in government spending in 30 years are aimed at locking in a federal budget surplus within a year.

This will establish the Labor government's economic credentials in time for a general election scheduled for late 2013.

The budget, unveiled last night, targets defence spending, cancels a planned corporate tax cut and removes a range of tax allowances, including redundancy payments for executives.

Treasurer Wayne Swan says the budget balance will move from a deficit of $A44.4 billion in the fiscal year ending June 30 to a surplus of $A1.5 billion in the next year. Net debt is projected to peak at 9.6% of GDP this fiscal year.

"Returning to surplus also locks in confidence and is Australia's best defence at a time when the global economy is changing dramatically," he said. "It creates a buffer in uncertain times and is a very clear sign of our strong economy.”

Military and foreign-aid programmes will be hardest hit by the $A33.6 billion in savings and cuts. Spending on some new equipment, such as the F-35 joint-strike fighter jets, will be delayed, while foreign-aid programmes have been deferred.

The government's plans depend on the broader economy expanding by a solid 3.25% in the next fiscal year, enough to keep unemployment at an average of 5.5%, but higher than the current average level of 5.2%.

Australia's economy grew at a slower than expected 2.3% in the final quarter of last year. The betting is that the mining boom will continue to generate the additional revenue needed to deliver a surplus and to provide financial relief for middle- and low-income families as the rest of the economy slows.

Fresh revenue will come in July in the form of a new mining profits tax, which is estimated to raise $A6.5 billion within two years, while carbon taxes will generate $A7.4 billion.

NBR staff
Wed, 09 May 2012

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Aussie budget locks in a surplus next year