Australia’s national budget fell further behind projections in February due in part to the effects of the high local dollar, taking the total shortfall to A$23.6 billion ($24.9 billion) for the first eight months of the financial year, according to Treasury figures.
The gap in the financial year to Feb. 28 was A$5.7 billion wider than was projected in the government’s Mid-Year Economic and Fiscal Outlook, primarily due to lower tax revenue and higher personal benefit payments, the statement said today.
“These revenue write-downs will inevitably have a big impact in 2012-13, but they will also have an impact across the entire forward estimates,” Finance Minister Penny Wong’s office said in an e-mailed statement. Revenues fell due to “the substantial hit to company profits as a result of the unusual divergence between the sustained high dollar and the terms of trade, continued global uncertainty and subdued price pressures.”
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.
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. It had forecast a deficit of A$17.9 billion for the fiscal year’s first eight months.
Gillard’s ruling Labor government narrowed the gap against the Tony Abbott-led Liberal-National coalition in an opinion poll released April 9. Labor rose 3 percentage points to 45 percent on a two-party preferred basis, while the opposition fell 3 points to 55 percent, according to a Newspoll published in the Australian newspaper April 9.
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. Abbott says the shortfall in revenue is an example of the government’s fiscal bungling.
Australia’s dollar has appreciated 75 percent against its U.S. counterpart since late October 2008. The Reserve Bank of Australia’s trade-weighted index, which tracks the Aussie against the currencies of 21 nations that account for at least 90 percent of the country’s commerce, rose 0.2 to 80.2 today, the highest level since February 1985.