Australia to Cut $6.7B to Meet Budget Pledge
Australia’s government will cut A$6.8 billion ($6.7 billion) in spending as Prime Minister Julia Gillard keeps a pledge to deliver a budget surplus and show fiscal restraint as a European debt crisis slows global growth.
The underlying cash deficit in the fiscal year ending June 30 will be A$37.1 billion, compared with a May budget estimate of A$22.6 billion, the Treasury said in a midyear review released in Canberra today. Spending cuts and savings over four years of A$6.8 billion will help deliver a surplus of A$1.5 billion the following year, compared with the previous projection of a A$3.5 billion excess.
The government forecast the unemployment rate will be 5.5 percent in June 2012, today’s report showed, compared with a 5.2 percent rate in October. Gross domestic product will expand 3.25 percent in the 12 months to June 30 and 3.25 percent in fiscal 2012-13, it predicted.
Earlier today, Fitch Ratings upgraded Australia’s long-term foreign-currency issuer default grade to AAA from AA+.
Fitch said one of Australia’s strengths is its debt-to-GDP ratio of 26.3 percent, compared with its peer group median of 55.7 percent. “This provides Australia with the fiscal space to weather adverse shocks,” the ratings company said.
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