Australia will get its fiscal settings right by returning the budget to surplus, improving its sustainability in the face of global economic woes, Finance Minister Penny Wong said.
“Building budget surpluses and taking decisions to improve the sustainability of the budget are critical to ensuring support for generations to come,” Wong said in an opinion piece published in the Sydney Morning Herald newspaper today. “A surplus positions the nation well and sends a strong message of confidence to investors both domestically and overseas.”
Prime Minister Julia Gillard is set to unveil a budget on May 8 that seeks to end four years of deficits as support for her government has fallen to near-record lows in opinion polls. The budget comes as the Reserve Bank of Australia yesterday cut growth and inflation forecasts amid slowing inflation, three days after slashing its key rate by half a percentage point to a two-year low.
In a bid to cut spending, Australia’s Defense Force announced this week it will delay buying fighter jets, helping the government add about A$1.6 billion in its 2012-2013 budget.
Gillard plans to cut 40 jobs from her own office, the Australian newspaper reported on May 3.
“You’ve got to work out what the right mix is and what’s best for Australian households and we believe a surplus is the best thing for Australian households and Australian businesses,” Wong said in an interview with Sky News today.
A surplus “continues to give the Reserve Bank room to move on interest rates, just as the Bank has done recently,” she said. “A surplus also recognizes a lot of the underlying strength in the economy as is exemplified by the investment figures and gives us a buffer in what is an uncertain world. So, for those reasons, a surplus is the right thing to do.”
Support for Gillard’s Labor Party, which faces elections by the end of 2013, slumped to within a percentage point of a record low in an opinion poll published May 1. Labor holds power in the 150-seat lower house with the backing of independent and minor party lawmakers.