Bloomberg News

Australia’s 2010-11 Budget Deficit Narrows on Lower Spending

September 29, 2011

(Updates with currency in fifth paragraph, net debt in sixth.)

Sept. 30 (Bloomberg) -- Australia’s budget deficit was narrower than forecast in the year through June as a reduction in spending more than offset lower-than-estimated tax revenue, Treasurer Wayne Swan said.

The shortfall was A$47.7 billion ($46.6 billion) in fiscal 2010-11, compared with the A$49.4 billion forecast in the May budget, Swan said in a statement today in Canberra. The smaller deficit reflected lower cash payments of A$3.6 billion, which exceeded a A$2 billion shortfall in cash receipts, he said.

Prime Minister Julia Gillard has pledged to return the nation’s budget to surplus in 2013, an election year. The goal will be harder to achieve as Australia’s economy, the only one in the developed world to avoid a recession during the 2009 global downturn, is buffeted by global financial market strains and weaker growth in major trading partners.

“Despite the major impact on budget revenues from the global financial crisis, recent natural disasters and a strong Australian dollar, Australia’s finances remain amongst the strongest in the developed world,” Swan said. “The government remains determined to return the budget to surplus in 2012-13, despite softer-than-expected revenues and increased global instability that will inevitably make the task more difficult.”

Global Instability

Elevated U.S. 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.

The Australian dollar was little changed, trading at 97.62 U.S. cents as of 9:14 a.m. in Sydney, from 97.75 cents before the final budget statement and 97.82 cents yesterday in New York.

Australian government net debt was A$84.6 billion, or 6.1 percent of GDP, in 2010-11, today’s statement showed.

“This is dramatically lower than the level across major advanced economies, which averaged a net debt of 75.3 percent of GDP in 2010,” said Swan, who was named finance minister of the year by Euromoney magazine this month.

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.

--Editors: Brendan Murray, Garfield Reynolds

To contact the reporter on 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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