$12B Federal Budget Deficit Could Hasten Labor Party Defeat in Sept 14 Election

Chances for an Australian Labor Party (ALP) victory in the Sept 14, 2013 election appear dimmer as ALP leader and Prime Minister Julia Gillard announces on Monday the $2 billion budget gap for the current financial year.

The development will translate into extensive spending cuts in the May 14 budget due to smaller income from business and the strong Australian dollar. This is expected to result in $4.5 billion shave off from anticipated earnings by June.

One impact of this is weaker voter support in the coming September poll since the cuts and deficit are a reverse of the Gillard government's earlier promise to return the budget to a surplus. As it is, internal party surveys show the ALP could be facing a wipeout in key federal seats in Melbourne's southeast.

The Australian explained the anticipated wipeout to disappointment with Ms Gillard and the federal government.

Ms Gillard will tackle the budget cuts and deficit in an important economic speech in Canberra as part of the Capita Reform Agenda Series that will explain the sharp revenue drop due to the contraction of the country's nominal gross domestic product as continue to make goods and services and are maintaining sales but at lower prices, resulting in lower profits.

Even until October 2012, Treasurer Wayne Swan was confident that the government could deliver a small federal budget surplus of $1.1 billion, but by April 18, ANZ economists had tipped the deficit for this year would hit $16.6 billion for the planned $2.2 surplus by 2015-16 to take place.

"The bottom line for the budget is this: the amount of tax revenue the government has collected so far this financial year is already $7.5 billion less than was forecast last October ... Treasury now estimates that his reduction will increase to around $12 billion by the end of the financial year," Ms Gillard was quoted by the Sydney Morning Herald.

However, Ms Gillard said despite the reduction in revenue, the government will not risk the future by cutting better school funding and improvement. "Our nation cannot afford to leave children behind or to leave out nation's future economy limping behind the pack, unable to attract the high-wage, high-skill jobs of the future. DisabilityCare must not be jeopardised," she added.