The Australian government’s bid to deliver the nation’s first budget surplus since the global financial crisis is being undermined by lower-than-expected tax revenue, Treasurer Wayne Swan said.
“Tax collections were running a further A$2 billion ($2.1 billion) behind estimates at the end of February, indicating the full-year shortfall is likely to be much larger,” Swan said in an e-mailed statement today. “Lower revenue means we will have to work much harder to find extra savings in the budget.”
Prime Minister Julia Gillard, whose government is slumping in opinion polls and faces an election next year, has pledged to end four years of deficits in the fiscal year that begins July 1. Her strategy has been threatened by global pressures including China’s economic growth slowdown, Europe’s debt crisis and elevated unemployment in the U.S.
“The ongoing global instability has had a big impact on our economy and our budget bottom line,” Swan said. “Since the global financial crisis struck, we’ve been forced to write down government tax revenues by A$140 billion. There will be more writedowns in next month’s budget.”
Australia’s underlying cash balance for the year to Feb. 29 was a deficit of A$29.4 billion, compared with a forecast made in November of a A$27.5 billion gap.
The shortfall “primarily relates to lower-than-anticipated taxation receipts” and higher-than-expected personal benefit payments, Finance Minister Penny Wong said in an April 13 statement.
Gillard has staked her government’s economic integrity on delivering a budget surplus. After assembling a minority government after the closest election in seven decades in August 2010, her Labor party has since suffered election losses at state level, leaving Gillard with allies governing just two of the nation’s six states.
Australia’s first female leader has also been forced to fend off a leadership challenge from predecessor Kevin Rudd, and has suffered near-record low results in polls.
Labor had 27 percent support in the Nielsen poll conducted March 29-31, compared with 47 percent for the Liberal-National opposition coalition led by Tony Abbott.
Governments across the region, including Japan, Indonesia and India, are grappling with slower tax revenue and trying to find ways to cut spending without exacerbating elevated unemployment.
Australia was the only major industrial economy to avoid a recession during the global downturn of 2009. Still, job growth stagnated last year and, until two interest-rate cuts in late 2011, the central bank maintained the highest benchmark borrowing cost in the developed world to temper inflation as a mining investment boom accelerated.
The Reserve Bank of Australia kept its benchmark interest rate unchanged at 4.25 percent this month after cutting borrowing costs in November and December to buttress the housing market, support jobs and boost confidence among consumers who are saving more.
Australia unexpectedly posted back-to-back trade deficits in February as coal and metal exports slumped. The central bank is relying on A$456 billion of resource projects to meet Chinese and Indian demand to drive economic growth and support employment.
Parliament is on hiatus until May 8 when the government will announce its budget.
“This will be a balanced budget -- balanced in that it charts a responsible middle course and balanced in that it gets us back in the black well before our peers,” Swan said today. He’s previously said returning to surplus was “a vital economic imperative.”
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