(Adds Gillard’s APEC comment in 11th paragraph.)
Nov. 13 (Bloomberg) -- Australian Prime Minister Julia Gillard’s pledge to return to a budget surplus in 2013 has been made “a lot tougher” by Europe’s sovereign debt crisis, Treasurer Wayne Swan said today.
“The hit to government revenue caused by the global turbulence means we’ll have to continue making tough budget decisions,” Swan said in an e-mailed statement today. The crisis is flowing “through to government revenues, and will add to the A$130 billion ($134 billion) in revenue write-downs we’ve seen since the global financial crisis first struck.”
Australia is unlikely to meet its pledge without policy changes, Deloitte Access Economics said Nov. 7, forecasting the shortfall will be A$1.9 billion in 2012-13, or A$5.4 billion worse than Treasury’s forecast for a A$3.5 billion surplus. Failure to achieve the target may stoke criticism of the Labor government’s fiscal management by the opposition Liberal- National coalition, which leads in opinion polls.
Former Treasury official Chris Richardson, now a partner at the Canberra-based economic advisory company Deloitte Access, said Nov. 7 that the “dream is over” for Swan’s bid to bring the budget to surplus by 2013. The underlying cash deficit in the 12 months to June 30, 2012, is forecast at A$31.2 billion, A$8.6 billion less than official estimates, he estimated.
The Reserve Bank of Australia earlier this month cut its forecasts for economic growth and inflation for the next two years as financial turmoil in Europe makes businesses more reluctant to hire and consumers wary about spending.
Italy is the latest nation to face an economic crisis, with Prime Minister Silvio Berlusconi resigning yesterday after his nation’s 10-year bond yield had surged past the 7 percent threshold that led Greece, Ireland and Portugal to seek European Union bailouts.
“Every economy in our region is feeling the impact of events in Europe,” Swan said. “Many European nations have been slow to face up to the tough decisions not just for the past 18 months, but for the past few decades. There’s been a failure to undertake the structural adjustments necessary to drive growth and increase competitiveness. Instead, budgets in many countries have been allowed to blow out and become unsustainable.”
President Barack Obama yesterday said a commitment by eight other nations, including Australia, to join the U.S. in forging an Asia-Pacific trade accord within the next year is evidence that “American leadership is still welcome.”
Obama announced at the Asia-Pacific Economic Cooperation forum in Honolulu that the officials agreed on a blueprint that will lead to drawing up a formal Trans-Pacific Partnership in the next 12 months, a deal that could create a model for expanded trade with more Asian countries.
Gillard is seeking such a partnership to help the budget go back in surplus by 2013, an election year. The Trans-Pacific Partnership would benefit the nation’s agriculture and manufacturing industries in particular, she said.
“When we look at the number of economies involved in the Trans-Pacific Partnership, currently the countries involved account for around one quarter of global gross domestic product,” Gillard told reporters in Honolulu yesterday on the fringes of APEC. “In ambition the Trans-Pacific Partnership has as a goal eliminating barriers to trade in our region.”
--Editor: Paul Tighe, Jim McDonald
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