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Australia Sees Surplus in 2014 as Forecast Slips on Revenue Drop

Wayne Swan, Australia's deputy prime minister and treasurer. Photographer: Jerome Favre/Bloomberg
Wayne Swan, Australia's deputy prime minister and treasurer. Photographer: Jerome Favre/Bloomberg

Australia’s budget should return to surplus in 2014 even as a drop in tax revenue forced the government to give up a pledge to balance its books in the current fiscal year, the country’s trade minister said.

The original target of a surplus in the fiscal year ending June 2013 could be achieved if positive signs around household spending continue through the rest of the year, Craig Emerson said in an interview on Sky News television yesterday. The country’s Treasurer Wayne Swan said Dec. 20 the government was unlikely to have a surplus because of a fall in tax revenues.

“There are good things going on in the economy,” Emerson said, citing prospects of improving performance for car sales, the housing market and the retail industry. “So long as the economy continues to improve we would get a surplus next year.”

With an election due in 2013, Australia’s Labor government has staked its economic credibility in part on delivering the first surplus since the 2009 global recession. Threatening that commitment is a weaker international outlook, lower prices of commodity exports and a high local dollar that’s hurting non-resource industries such as tourism and manufacturing.

The government is “spending like a drunken sailor” and dropping the surplus commitment was a breach of trust, opposition leader Tony Abbott said in a Dec. 21 interview with Seven Network television.

“This mob don’t get it when it comes to the economy,” he said, according to a transcript.

Forecasts Downgraded

The downgrade to the government’s budget forecasts was necessary as tax receipts in the months from July to October came in below earlier expectations, Emerson said yesterday. That could still turn around if other sectors of the economy improve.

“I have not ruled out, nor should anyone rule out, the possibility of a surplus in 2012-2013,” Emerson said. “However, it is looking unlikely. Let’s see how those figures pan out for the rest of the year.”

In an e-mailed statement yesterday, Swan said Australia had one of the strongest budget positions in the developed world and blamed “negativity” for hurting household confidence.

“We have solid growth, low unemployment, contained inflation, lower interest rates and record levels of investment,” he said. “We will keep managing the budget in a balanced way, exercising spending restraint while supporting growth and jobs.”

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