The Australian government’s promise to deliver a budget surplus in the current fiscal year has blown out to a A$19.4 billion (US$19.4 billion) deficit as a fading mining boom coupled with a buoyant Australian dollar slows the economy.
The projected deficit for the 12 months ending June 30 is included in the government’s economic blueprint for the coming year released yesterday, which includes spending increases in defense, foreign aid, care for the disabled and education.
It is Australian Treasurer Wayne Swan’s sixth annual budget and is likely to be the last for his center-left Labor Party government, widely expected to be defeated at elections on Sept. 14.
The budget forecast a smaller A$18 billion deficit in the fiscal year ending June 2014, with net debt peaking at A$191.6 billion — 11.4 percent of GDP — in 2014-2015. The books would finally be balanced in 2015-2016 with an A$800 million surplus. The surplus would widen to US$6.6 billion surplus the following year.
A year ago, Swan declared an end to budget deficits in the aftermath of the global financial crisis and predicted a A$1.5 billion surplus in the current fiscal year.
Swan yesterday defended the government’s decision not to make deeper spending cuts to balance the government’s books sooner.
“Cutting to the bone puts Australian jobs and our economy at risk, something this Labor government will never accept,” Swan told parliament.
“To those who would take us down the European road of savage austerity, I say the social destruction that comes with cutting too much, too hard, too fast is not the Australian way,” he said.
The budget will have to be endorsed by parliament over the next two months if it is to be implemented.
Government revenue has been increasing every year since 2009-2010. Tax receipts are forecast to rise 7.4 percent in the next fiscal year to A$376 billion.
However, the government has struggled to rein in expenditure ever since its initial splurge of stimulus spending at the peak of the global financial crisis kept the economy out of recession.
Economic growth is forecast to slow from 3 percent in 2012-2013 to 2.75 percent next year before gathering pace again.
Most economists were surprised when Australia’s jobless rate fell from 5.6 percent in March to 5.5 percent last month. The budget expects unemployment will rise to 5.75 percent for the next two years before falling back to 5 percent in 2015-2016.
Defense spending is set to increase despite Australian troops withdrawing from Afghanistan, East Timor and the Solomon Islands this calendar year.
The defense allocation has swollen from A$103 billion spread over four years in last’s year’s budget to A$113 billion over four years in the latest budget.
The government plans to introduce a new levy from July next year that would raise A$11.6 billion over three years to improve care for Australians with severe disabilities.