Wayne Swan abandons pretence on returning budget to surplus

Treasurer Wayne Swan
Treasurer Wayne Swan Contributed

FEDERAL Treasurer Wayne Swan says he doesn't care about the inevitable political problems that will follow the government's decision to all but abandon its promise of returning the budget to surplus this financial year.

The revelation earlier on Thursday that tax receipts in the four months to October were already $3.9 billion less than forecast left Mr Swan with little choice but to walk away from the government's already razor thin $1.1 billion surplus pledge.

He used words like "sledgehammer" and "whack" in an attempt to explain why it was "unlikely that there will be a surplus in 2012/13".

"The main reason for this is the very substantial hit to profits that Australian companies have experienced in the early months of this financial year," Mr Swan told reporters in Canberra.

"And this isn't just in resources, it's right across the board."

Prior to Thursday, economists had been calling on the government to abandon its blind pursuit of a surplus in 2012/13.

Only this week former Reserve Bank governor Bernie Fraser warned the government it risked damaging the economy if it continued cutting spending to achieve a surplus for purely political reasons.

But despite the backing of economists the government is almost certain to suffer serious political damage, having spent more than three years promising a return to surplus in 2013.

Mr Swan said abandoning the surplus goal was the right thing to do in the face of dwindling revenues.

"It wouldn't be responsible to continue to make up for that revenue hole if than endangered growth or jobs," he said.

"At the end of the day I don't care about the political outcomes, I care about the economic outcomes."

Mr Swan said government spending was actually $1.3 billion less than the May forecast.

Resources rent taxes raised $500 million in October - up from $213 million in September - although the government would not specify how much the mining tax contributed to that figure.

Mr Swan would not be drawn on what the budget bottom line might look like at the end of the financial year.

The government may now be tempted to call an election before September, when the final budget outcome is usually revealed.

While Mr Swan's announcement drew praise from economists, unions and welfare groups like ACOSS, the Coalition was never going to be that charitable.

Opposition Leader Tony Abbott said it was further proof the government could not be trusted, using the occasion to remind voters of Prime Minister Julia Gillard's broken carbon tax pledge.

He vowed to "pursue the government every single day until the next election on its failure to deliver the surplus".

"You just can't trust this government to tell the truth," Mr Abbott said.

He said delivering a surplus was "absolutely vital" for the Australian economy.

Shadow treasurer Joe Hockey was equally scathing, saying Mr Swan was "not fit to manage the economy".

"Enough is enough. They are the most incompetent government Australia has ever had, they are the most incompetent economic managers Australia has ever had," Mr Hockey said.

Topics:  australian government budget economy finance politics surplus wayne swan

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