Australia Abandons Pledge to Return to Surplus

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.

via CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza