End of the Road for Australia’s Budget Surplus Target

On the eve of Dec 21, supposed to be the end of the world by Mayan Long Count Calendar reckoning, Australian Treasurer Wayne Swan dropped a financial asteroid that would seem like a doomsday scenario for the country's coffers. His admission that the federal government would not likely delivery its promised budget surplus in 2013 spelled the end of the road for swift economic recovery.

"What we've seen is a sledgehammer hit our revenues. 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," Mr Swan said.

He announced the grim news after new figures said that tax receipts during the first three quarters of the current financial year were $3.9 billion lower than expected.

Mr Swan said just to achieve a balanced budget and fulfill a 2010 campaign promise to deliver a budget surplus by 2012-2013 would be irresponsible if it would result in more budget cuts.

Having learned the lesson, the treasurer declined to make another target date for a return to surplus and brushed aside the political impact of unfulfilled campaign promises on the cusp of a federal election in 2013.

He blamed the sharp decline in business taxes, which was caused by weaker commodity prices and the negative impact of a strong Australian currency on other industries, for Labor reneging on the budget surplus promise. However, Mr Swan stressed that the Gillard government matched the reduction in tax revenues with cut in public spending by $1.3 billion.

In a carpe diem moment, Opposition leader Tony Abbott - who is languishing in pre-election surveys because of his perceived negativity and stands to benefit from this development - compared Mr Swan's announcement to the 2010 promise of his nemesis, Australian Prime Minister Julia Gillard, not to introduce a carbon tax which the federal government started to collect in July 2012.

"What this demonstrates is you just can't trust this government to manage the economy and you just can't trust the government to tell the truth. It is a failure of trust. We will pursue the government every single day until the next election on its failure to deliver a surplus," Mr Abbott told media on Thursday in Sydney.

Australia's much-awaited election, which would see Aussies picking who would be the best of worse candidates for prime minister, is premised on the Mayan end-of-the-world forecast not coming to pass on Friday.

While the latest forecast said a $2.2 billion budget surplus is targeted for 2013-2014, experts said the current deficit would make it a more difficult target to achieve.