Australian Treasurer Wayne Swan will eschew European-style austerity as a stronger currency slows growth, wagering the government can win a Sept. 14 election fought on jobs and absorb the pain of a broken surplus promise.
The underlying cash deficit will be A$18 billion ($17.9 billion) in the 12 months to June 30, 2014, Swan said in Canberra yesterday as he released the federal budget. The A$19.4 billion shortfall this fiscal year is 1.3 percent of gross domestic product, compared with a projected A$1.1 billion surplus released in the government’s mid-year review seven months ago. The Australian dollar dropped to an 11-month low after the release.
“To those who would take us down the European road of savage austerity I say the social destruction that comes from cutting too much, too hard, too fast is not the Australian way,” Swan told parliament. “The alternative, cutting to the bone, puts Australian jobs and our economy at risk.”
Swan outlined a longer path back to the black that funds pledged spending on infrastructure, education and disability care, while saying restraint gives the Reserve Bank of Australia scope to cut record-low interest rates even further. Prime Minister Julia Gillard’s Labor government trails Tony Abbott’s opposition by double digits and has seen its economic credibility weakened as a stronger currency dents tax revenue and weighs on exporters and manufacturers.
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