Australia has lost A$7.5 billion (US$7.7 billion) in revenue since the October mid-year budget review last year due to its strong currency and lower terms of trade, pushing the nation further into deficit, Australian Treasurer Wayne Swan said yesterday.
“We’ve been hit in Australia with a high dollar, lower terms of trade, which has had a dramatic impact upon the profitability of companies and prices more generally in the economy,” Swan said in an interview with the Australian Broadcasting Corp’s (ABC) Insiders program.
“That has caused a hit, if you like, a sledgehammer to revenues in the budget since the mid-year update of something like A$7.5 billion,” he said.
A “dramatic” writedown in state revenue means the government will have to make “some very difficult choices,” Swan said in his weekly economic note, without being specific.
The budget deficit widened to A$23.6 billion for the first eight months of the financial year, already A$5.7 billion wider than earlier projected, primarily due to reduced tax revenue and higher personal benefit payments, according to Treasury figures released on April 12.
In its October mid-year review, the government forecast a budget surplus of A$1.08 billion in the 12 months ending on 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.
A high currency has hurt earnings for industries such as manufacturing, while an easing of commodity prices lowered the gains from exports and the nation’s terms of trade. The so- called Aussie dollar, the world’s fifth most-traded currency, has appreciated more than 70 percent against its US counterpart since late October 2008.
“Of course the impact won’t just be in this financial year, it will also be across the forward estimates,” Swan said in the ABC interview.
Australian Prime Minister Julia Gillard this month unveiled a plan to boost education spending by A$14.5 billion over six years in what she called the biggest overhaul of school funding in 40 years.
Earlier this month, Swan announced plans to curb tax concessions for wealthy Australians saving for retirement, seeking savings of about A$900 million over four years.
Gillard’s ruling Labor government narrowed the gap against the Liberal-National coalition, led by opposition leader Tony Abbott, in an opinion poll released on 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 on April 9.