By Nick Mann | 18 March 2013
Australian treasurer Wayne Swan has ruled out making immediate spending cuts to fill the hole in the country’s finances left by significantly lower than expected revenues.
Monthly figures published by the Department of Finance and Deregulation on Friday revealed that revenues for the seven months to the end of January were $6bn lower than forecast earlier this year.
This was partially offset by spending being $1.4bn less than forecast for the period but still left a $18.7bn deficit – almost $5bn more than the $13.8bn forecast for the end of January in the Mid year economic and fiscal outlook.
In his weekly economic note published yesterday, Swan said the ‘massive hit’ to revenues was largely the result of lower corporate profits. He attributed this to the combination of a fall in Australia’s terms of trade – the price it receives for exports compared with the price it pays for imports – and the ‘persistently high’ value of the Australian dollar.
‘This has contributed to subdued price pressures and weaker profitability across the economy, which means that nominal gross domestic product – the value of the goods and services we produce – has grown more slowly than real GDP for three straight quarters. This run is unprecedented since records began,’ Swan explained.
The lower than expected spending detailed in last week’s figures ‘further highlights that the dramatic hit to the budget bottom line is being driven entirely by lower than expected revenues while the government continues to exercise spending restraint’, he claimed.
In January, when the Mid year economic and fiscal outlook was published, the government had said it expected to record a $1.2bn budget surplus in the fiscal year, which runs until June. But Swan ruled out cutting more spending to bring its finances back in line with then forecasts.
‘We will not put growth and jobs in our economy at risk by cutting further and deeper in the near term to fill in a hole in revenues,’ he said. ‘Because it is only through supporting jobs and growth over the past five years that we have been able to keep our nation's impressive run of economic growth going, while virtually every single developed economy fell into recession – with many still struggling to recoup lost output.’
