Australia reported a slight narrowing of its deficit to A$43.7 billion (US$45.4 billion) yesterday, but warned that plunging commodities prices were hitting plans to return to surplus next year.
Australian Treasurer Wayne Swan said the final deficit figure for the year to June 30 had come in below the A$44.4 billion forecast in May, with taxation receipts booming as a result of solid wage and employment growth.
However, he said that there had been a “hefty” A$876 million fall in corporate taxes due to ongoing jitters from the financial crisis and warned of the budget impact of lower commodity prices due to the slowdown in China and Europe.
“Commodity prices have declined somewhat in recent months and they do remain substantially lower than what we factored into our budget forecasts,” Swan told reporters.
“This will hit government revenues significantly, which does make it harder to deliver a budget surplus. It does mean we will have to find more savings,” he added.
The Labor government has been committed to returning the budget to surplus in this year and next, hoping it will improve its standing with voters. It vowed an ambitious A$33.6 billion in cuts in the May budget, including significant reductions in military spending and foreign aid, targeting a modest A$1.5 billion surplus for the fiscal year ending June 30 next year.
Swan said the final A$43.7 billion deficit compared with the earlier forecast of A$44.4 billion for 2011-2012 was the “smallest variation between the budget estimate and the final outcome for a decade.”
It represents 3 percent of Australia’s GDP, which he said was “less than half the average budget deficit recorded for the major advanced economies in 2011” and compared with 10 percent of GDP in the US.