Australia needs to find “substantial savings” in its budget scheduled for May 8 as a result of a cumulative A$150 billion (US$156 billion) writedown in expected tax revenues over the past four years, Australian Treasurer Wayne Swan said yesterday.
Returning the budget to surplus in the year through June next year would be “that much harder” for Canberra as a result of cuts in tax revenues which are expected to reduce by A$5 billion the budget that year and again in the year through June 2014, Swan said in a weekly economic note.
“Our savings will be targeted and responsible, charting a middle course between those who say take a chainsaw to government spending and those who say we should not cut at all,” he said in an e-mailed statement.
Taxes would amount to 22.8 percent of GDP over the two years starting in July next year, compared with 24.2 percent during the first stage of the country’s mining boom in the middle of the last decade, he said.
A surplus would give “flexibility” to the Reserve Bank of Australia to cut interest rates “if the independent board thinks that is required,” Swan said.
The central bank is expected to make the first cut to official borrowing costs in five months at a meeting tomorrow, with 16 out of 28 analysts surveyed by Bloomberg forecasting interest rates cuts of 0.5 percentage points over the next two months.