Australia says deficit to be smaller than forecast

May 9, 2010

, SYDNEY, May 9 – Australia\’s budget deficit will be smaller than previously forecast, Treasurer Wayne Swan said on Sunday, adding that the country\’s economy was in a good position to withstand any global shocks.

Swan, who releases the national budget on Tuesday, would not give an exact figure on the deficit, which was 12 months ago forecast to be a record 57.6 billion dollars (51.2 billion US) for 2009-2010.

"Certainly the deficit will be less than we were forecasting a year ago," he told commercial television, adding that the global downturn was still having a lingering impact on the economy.

"But, of course, the outlook will be better."

Swan said the deficit would have been worse had the centre-left Labor government not introduced a 70 billion dollar stimulus package at the height of the global financial crisis in late 2008.

"If we hadn\’t moved to stimulate the economy, Australia would have gone into recession last year," he told Channel Nine television.

"Our deficit and our debt would have been far higher if we had not chosen to stimulate the economy in the way we did."

The treasurer said that the global outlook, against the backdrop of the unprecedented 110 billion euros (140 billion dollars) bail-out package for Greece, was "patchy".

But he said Australia was in a better position than most countries to withstand external shocks.

"The great advantage … that Australia has, is that we avoided recession," Swan said. "We are not wading through the rubble of high unemployment and forced business closures.

"So if we do go through a new period of economic turbulence caused by events in Europe that we\’ve seen in recent times, we are better placed than just about any other advanced economy to handle that."

Swan said one of the main elements of the budget would be greater funding of the health system, as a well as modest tax cuts for people on average wages.

The government, which is expected to face an election this year, has said it will also introduce a 40 percent tax on resources profits to take advantage of the mining boom.

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