CANBERRA — The Australian government will outline the extent of savings it needs to make to deliver on its promise of a budget surplus for the year to next June when it releases a midyear budget update today amid falling commodity prices.
Australia has delivered successive budget deficits since 2008 due to stimulus spending to help avoid recession.
The government faces elections in the second half of next year, and is determined to restore the budget to surplus to head off opposition attacks on its economic credentials.
Treasurer Wayne Swan said he would announce “significant” savings in the midyear economic and fiscal outlook to offset lower than expected government revenue, as a result of renewed weakness in the global economy and lower commodity prices.
“The toughest conditions in the global economy in generations have cut a swathe through traditional sources of revenue,” Mr Swan said on Sunday.
“And the renewed weakness in the international economy combined with lower than expected commodity prices has further hit revenues. This will require more savings to be found in our budget.”
In its May budget, the government promised it would return a surplus of A$1.5bn ($1.5bn), or 0.1% of gross domestic product, by the middle of next year.
Since May, government revenue has been hit by falling commodity prices, a slowdown in the economies of its major trading partners and lower than forecast revenue from its controversial tax on coal and iron-ore profits.
China’s slowing growth has cut once red-hot demand for Australia’s resources. Iron-ore prices have fallen about 15%, thermal coal by 9% and coking coal about 30% since the mining tax was launched in July, placing pressure on the budget forecast that the tax would provide an estimated $13.4bn over its first four years.
Mr Swan did not provide any details of the proposed savings or revisions to forecasts made in May, but reaffirmed a commitment to returning a surplus.
Finance Minister Penny Wong said on Sky News on Sunday that although global circumstances had changed, Australia was still growing “at around trend growth.… And in those circumstances, what you want to do is bring the budget back to surplus.”