Australia to Cut $6.7B to Meet Budget Pledge

Australia’s government will cut A$6.8 billion ($6.7 billion) in spending as Prime Minister Julia Gillard keeps a pledge to deliver a budget surplus and show fiscal restraint as a European debt crisis slows global growth.

The underlying cash deficit in the fiscal year ending June 30 will be A$37.1 billion, compared with a May budget estimate of A$22.6 billion, the Treasury said in a midyear review released in Canberra today. Spending cuts and savings over four years of A$6.8 billion will help deliver a surplus of A$1.5 billion the following year, compared with the previous projection of a A$3.5 billion excess.

The government forecast the unemployment rate will be 5.5 percent in June 2012, today’s report showed, compared with a 5.2 percent rate in October. Gross domestic product will expand 3.25 percent in the 12 months to June 30 and 3.25 percent in fiscal 2012-13, it predicted.

Earlier today, Fitch Ratings upgraded Australia’s long-term foreign-currency issuer default grade to AAA from AA+.

Fitch said one of Australia’s strengths is its debt-to-GDP ratio of 26.3 percent, compared with its peer group median of 55.7 percent. “This provides Australia with the fiscal space to weather adverse shocks,” the ratings company said.

To contact the reporter on this story: Michael Heath in Canberra at mheath1@bloomberg.net

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.