The Australian government will announce “significant” cuts at a budget update tomorrow as it remains committed to restoring a surplus, according to Treasurer Wayne Swan.
“The toughest conditions in the global economy in generations have cut a swathe through traditional sources of revenues,” Swan said today in his weekly economic note. “This will require more savings to be found. The savings will be significant.”
The federal government is preparing to reveal A$4 billion ($4.1 billion) in spending cuts and other measures, the Sydney Morning Herald said yesterday. Increased charges for visa applications will boost revenue by about A$500 million, the Sunday Telegraph reported today, without saying where it got the information.
Prime Minister Julia Gillard’s government has committed to restoring a budget surplus this fiscal year after four years of deficits even as growth slows. Australia’s economy is succumbing to a slowdown in world growth that the International Monetary Fund predicted this month would decelerate to the weakest pace since the 2009 recession.
“I have no doubts whatsoever about the critical importance of our budget strategy,” Swan said. Returning to surplus was “appropriate” because of the Australian economy’s strong fundamentals including low unemployment, inflation in check and a robust investment pipeline, he said.
The government could abandon its surplus commitment and consider rate cuts if the global economy gets worse, the International Monetary Fund said Sept. 20. The country recorded its widest trade deficit since 2008, with exports falling for the third straight month in August, the Bureau of Statistics said in an Oct. 3 report.
Australia, the biggest exporter of iron ore and coal, has managed to avoid recession for 21 years as China’s infrastructure-led economic stimulus fueled demand for commodities. Slower demand growth for commodities this year has weighed on prices, denting projected tax revenues. The price of iron ore has fallen 14 percent since July 1.