Australia announces spending cuts to return to surplus

CANBERRA, Nov 29 (Singapore Times): Global uncertainty over the European debt crisis has forced Australia to cut its economic growth and revenue forecasts and to outline new spending cuts so the government can honour a promise to return the budget to surplus mid-2013. Treasurer Wayne Swan said Tuesday the government would deliver a small A$1.5 billion budget surplus in 201213, after a blowout in the current year's budget deficit to A$37.1 billion versus the May budget forecast of A$22.6 billion. The Labour government, first elected in 2007, faces elections in late 2013 and is determined to deliver its first surplus before it goes to the polls, although Mr Swan said the surplus was needed to safeguard the economy from global uncertainty. '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,' Mr Swan said. The treasurer revised Australia's economic growth forecast down to 3.25 per cent for both the current fiscal year and 2012-13, down from an earlier forecast of 4.0 per cent growth for this year and 3.75 per cent in 2012-13. Financial markets showed little reaction to the budget statement, though analysts cited mild falls on the stock market to the lower growth outlook. The Australian dollar was little changed at US$0.9890, taking a breather after gaining more than 2 full cents Monday on hopes that euro zone officials would make some progress in resolving the region's debt problem. More ammunition for rate cuts JP Morgan economist Stephen Walters said the surplus was an iron-clad political pledge, but could leave room for Australia's central bank to cut interest rates further in the near term. The Reserve Bank of Australia cut rates by 25 basis points to 4.5 per cent in November. 'The government tidying up the budget over time, even if a surplus ultimately can't be delivered next year as promised, provides additional scope for the RBA to cut official interest rates in the near term,' Mr Walters said.