Wayne Swan dumps the surplus

Federal Treasurer Wayne Swan has announced the Federal Government will probably not achieve the promised budget surplus in the 2012/13 budget year, saying that the strong Australian dollar has contributed to a fall in profits across all Australian businesses.

As a result, government revenue is falling, making it impossible to deliver its wafer-thin promise of a $1.1 billion surplus.

Cash receipts for 2012-13 so far are $3.9 billion below expectations, Swan said. He repeated several times that it was this fall in revenues, rather than an increase in government spending, which had jeopardised the government’s budgetary position. He said the current ratio of government spending to GDP of 23.8% was below the average spend in the previous Howard Government.

“In just four months, we’ve already seen the hit to revenue we were expecting for the full year,” Swan said.

“Now, obviously dramatically lower tax revenue now makes it unlikely that there will be a surplus in 2012/13.”

The government first talked about bringing the budget back to surplus in 2012/13 in 2010. It had planned to deliver a wafer-thin surplus of $1.1 billion in the coming budget.

“So through this whole period we have kept making responsible savings to fill what has been an emerging and growing revenue hole,” Swan said.

“But things are a bit different now and that’s the main point I want to make today.

“At this stage I don’t think it would be responsible to cut harder or further in 2012/13 to fill a hole in the tax system if that puts jobs or growth at risk.”

Swan said that the “real economy” remained resilient.

This article first appeared on LeadingCompany.