Australia faces a “massive hit” to government revenue, pushing the nation further into deficit ahead of an election in September, Treasurer Wayne Swan said.
The national budget fell a further A$4.6 billion ($4.8 billion) into deficit in the first four weeks of 2013, taking the total shortfall to A$26.8 billion for the first seven months of the financial year, according to Treasury figures released by the government March 15. Just three week ago, Swan predicted a reduction in revenue would add just A$2 billion to the deficit in January.
“One of the big challenges we face is a massive hit to government revenues,” Swan said in a weekly economic note yesterday. Revenue downgrades “will inevitably continue to impact beyond the current year.”
Labor Prime Minister Julia Gillard’s bid to overcome the opposition Liberal-National coalition’s lead in opinion polls is being damaged by weaker growth, lower prices for Australia’s resources, and a strong local currency that’s curbing tax receipts. Gillard, the nation’s first female leader, was forced in December to abandon a pledge to return the budget to a surplus this year.
“We will not put growth and jobs in our economy at risk by cutting further and deeper in the near term to fill in a hole in revenues,” said Swan.
In its October mid-year review, the government forecast a budget surplus of A$1.08 billion in the 12 months ending June 30. It recorded a A$44 billion deficit last fiscal year.
Government revenues rose 7.7 percent during the first seven months of the financial year, compared with the same period in 2011-2012, according to Treasury figures released March 15 by Finance Minister Penny Wong. Spending was up by 3.6 percent. Personal income tax payments were up 9.8 percent, more than the 8.4 percent forecast in the budget update in October. Company tax receipts fell 1.6 percent.
The Labor government’s support among voters rose 3 percentage points to 48 percent on a two-party preferred basis, with Tony Abbott’s Liberal-National coalition falling 3 points to 52 percent, according to a Newspoll survey published in the Australian newspaper March 12.
Gillard’s so-called minerals resource rent tax, which puts a 30 percent levy on iron-ore and coal profits, raised A$126 million in its first six months, trailing targets, the government said last month. Abbott says the shortfall in revenue is an example of the government’s fiscal bungling.