Australia’s government abandoned a long-held pledge to return its budget to surplus, blaming a painfully high local currency, lower export earnings and lower company profits for blowing a massive hole in tax takings.
Treasurer Wayne Swan said cutting spending further to achieve its pledge of a small surplus in the fiscal year to end June 2013 would threaten economic growth and be “self-defeating”.
“Dramatically lower tax revenue now makes it unlikely that there will be a surplus in 2012-13,” Swan told reporters in Canberra on Thursday, adding that revenue in the July-October period was A$3.9 billion ($4.1 billion) lower than had been forecast.
“At this stage I don’t think it would be responsible to cut harder or further in 2012-13 to fill the hole in the tax system, if that puts jobs or growth at risk,” he said.
Swan’s comments will be a major blow to the Labor minority government, well behind in opinion polls and due to face elections in the second half of 2013. It has long promised to deliver a surplus in the year ending June 30, 2013.
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