Bloomberg News

Australia Revenue Less Than Expected as Swan Sees Challenge

September 29, 2011

Sept. 30 (Bloomberg) -- Australia’s fiscal revenue for the year through June fell short of the government’s estimates by about A$2 billion ($2 billion) after floods and an appreciating currency undermined tax receipts.

“We’ve seen recent turbulence in the global economy which obviously makes it more difficult to return to surplus, but we remain determined to do so in 2012-13,” Treasurer Wayne Swan said in a statement ahead of the government’s release today of the final 2010-11 budget figures.

The revenue shortfall may stoke criticism of Prime Minister Julia Gillard’s fiscal management by the opposition Liberal- National coalition, which leads her Labor party in opinion polls. Gillard has pledged to return the budget to surplus in 2013, an election year.

Elevated American unemployment, Europe’s failure to contain a debt crisis and slowing Chinese demand for commodities may contribute to a less robust rebound in Australia’s economy next year. The International Monetary Fund last month lowered its forecast for the nation’s increase in gross domestic product in 2012 to 3.3 percent, from 3.5 percent in early August.

Myer Holdings Ltd., Australia’s biggest department-store chain, sees consumer confidence at a three-decade low and doesn’t expect any improvement in at least six months, Chief Executive Officer Bernie Brookes said in an interview this week.

Australia’s economy contracted 0.9 percent in the first quarter this year from the prior quarter, according to government figures. GDP rose 1.2 percent in the second quarter, the most in four years, as the economy began rebounded from Queensland flooding.

Opposition Criticism

“The Labor Government has failed to deliver a single budget surplus since coming to office in 2007,” opposition leader Tony Abbott said in a May statement on his website. “In fact, Labor hasn’t even delivered a surplus in the past 21 years.”

Swan said in his statement that “our public finances remain among the strongest in the developed world with our net debt position less than a tenth of the major advanced economies.”

In its May 10 fiscal blueprint, Gillard’s government said it would end 23 years of spending growth to ease inflationary pressures. Consumer prices have climbed amid the biggest mining boom in Australian history.

“The final budget outcome will reflect the A$130 billion hit to government revenues caused by the global recession, much of which occurred in 2010-11, as well as recent natural disasters and the high dollar,” Swan said.

In the May budget, the government forecast the underlying cash deficit would narrow to A$22.6 billion in the 12 months through June 2012, less than half the A$49.4 billion gap a year earlier. The government said it planned A$22.2 billion in savings over the next four years, which it projects will help deliver a A$3.5 billion surplus in 2012-13.

--Editors: Brendan Murray, Chris Anstey

To contact the reporter for this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang in Singapore at sphang@bloomberg.net


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