Australia forecasting budget surplus in new year

Associated Press + More

By ROD McGUIRK, Associated Press

CANBERRA, Australia (AP) — Australia's government is preparing to reveal a spending plan that would make it the first major economy to return to a budget surplus after the global financial crisis.

Treasurer and Deputy Prime Minister Wayne Swan on Tuesday foreshadowed big spending cuts to achieve what he described as a "modest" surplus in the fiscal year beginning July 1. Media reports have predicted a 1.5 billion Australian dollar ($1.5 billion) surplus target for the AU$1.4 trillion Australian economy.

The government had predicted a AU$22.6 billion deficit for the current fiscal year when the last budget was announced a year ago. That deficit rose to AU$37 billion when economic projections were reviewed in November due to Australia's slower-than-expected economic recovery.

Swan said poorer Australians will be spared spending cuts while wealthier Australians will have to carry a greater tax burden.

The government has foreshadowed that the defense budget will be trimmed.

Swan said a surplus budget was important because of global economic uncertainty.

"Bringing the budget back to surplus, making sure our prosperity is fairly shared and looking after the most vulnerable are what this budget is really about," Swan told reporters outside Parliament House.

"It's the fifth budget I've delivered but in some ways it's being delivered in times of great uncertainty and it's brought great challenges," he added.

Australia scraped through the global downturn without a recession thanks to Chinese industrial demand for Australian iron ore and other natural resources.

The central bank last week reduced the benchmark cash interest rate by half a percentage point to 3.75 percent due to the sluggish economy outside the booming resource sector.

Sen. Christine Milne, leader of the Greens party which supports the minority Labor Party, warned that government spending cuts could result in recession in states that were not rich in minerals.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.