Tough spending cuts to get Australia into surplus

Australia announced billions of dollars in new spending cuts and savings in a bid to return its budget to surplus by 2012/13 after a deterioration in global economic conditions. In its mid-year economic and fiscal outlook, the government forecast a surplus of Aus$1.5 billion (US$1.48 billion), below its May projection of $3.5 billion, to be achieved with Aus$11.5 billion of savings over four years. The new figures showed the budget deficit has ballooned from Aus$22.6 billion to Aus$37.1 billion, savaged by slowing global growth. "Global economic and financial conditions have deteriorated markedly in recent months, and the risks to global stability from the European sovereign debt crisis have intensified," said Treasurer Wayne Swan. "Global growth prospects have been downgraded markedly in 2012, with the euro area expected to return to recession. "This has led to a weaker near-term economic and fiscal outlook for Australia since the budget and substantial reductions to government revenues." Income was hit hard by lower taxation revenue while spending on flood and disaster reconstruction in Queensland state was higher than thought. Savings will come from a crackdown on the living away from home allowance tax concessions, which the government claims are being abused by foreign workers and highly paid executives, and the deferring of other tax reforms. The government has also cut its growth forecast for the current financial year and next, in line with revisions made by the central Reserve Bank of Australia earlier this month. Economic growth for 2011/12 and 2012/13 is now forecast at 3.25 percent each year, down from previous forecasts of four percent and 3.75 percent respectively.