Federal Treasurer Wayne Swan says government revenue has taken a ‘sledgehammer hit’.
Photo: Mark Nolan
Treasurer Wayne Swan has admitted that a surplus is unlikely in the 2012-13 budget, following a slump in government revenue due to the fall in commodity prices.
Mr Swan says that economic data released on Thursday demonstrated a significant fall in revenue: “What we have seen is a sledgehammer hit to revenues.”
The promised budget surplus has been a fixture of the federal political debate, with the government insisting it would meet its surplus commitment as the opposition argued it never would. Many market economists have said the insistence on delivering a surplus, whatever the economic environment, was unwise and could reduce economic growth and increase unemployment.
The Australian Financial Review reported last week that the federal Treasury had advised Mr Swan to abandon the plan and allow automatic stabilisers - the cyclical variations in revenue and spending that naturally pull the budget between surplus and deficit - to function and cushion any fall in economic growth.
Mr Swan says in the current economic environment further cuts to the government’s revenue could have perverse outcomes. “I simply couldn’t stand here and say that would be the responsible thing to do,” he says.
He says that supporting growth and jobs creation determined the decision while acknowledging the likely political fallout. “At the end of the day, I don’t care about the political implications,” he says.
The opposition has long argued that the government would not achieve a budget surplus. Opposition Leader Tony Abbott says the abandoning of the commitment reveals the government as untrustworthy.
“For three years they have been boasting, for three years they have been saying that this surplus is their badge of their economic credibility, well they don’t have it,” Mr Abbott says.
Executive chairman of ad buying agency Aegis Media Australian & New Zealand Harold Mitchell supports the shift, saying the government needs to respond to changes in economic circumstances.
“It’s the wise thing to do,” the BRW rich-lister says.