Australian budget set to return to surplus in 2013

Duncan Kennedy on how Canberra balances its books

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Australia has said it will return to a budget surplus in 2012-13, making it one of the first developed nations to balance its books since the financial crisis began in 2008.

Treasurer Wayne Swan outlined a budget on Tuesday that aims to be in credit by 1.5bn Australian dollars ($1.5bn; £967m) in the year to 30 June 2013.

Defence spending will be cut and a rise in overseas aid will be deferred.

It comes as support for Prime Minister Julia Gillard nears record lows.

Australia has run a budget deficit for the past four years, with the deficit for the current year about A$44.4bn, the equivalent of 3% of GDP.

Surplus years

A balanced budget was an election promise by the Labor government and Mr Swan said it would "provide a buffer against global uncertainty, and continue to give the Reserve Bank room to cut interest rates for families".

Analysis

Australia's Treasurer Wayne Swan has delivered an economic blueprint that could be the last chance for an unpopular, scandal-ridden government that is sinking in the opinion polls to win back support from traditional Labor voters.

Mr Swan is promising to return the budget to a small, yet politically potent surplus in 2012-13 through billions of dollars of cuts from corporate Australia and the wealthy.

It's a sugar-coated plan that is firmly focused on a federal election due next year.

Mr Swan has vowed to share more of the riches of a spectacular mining boom that's fuelled by demand for natural resources in Asia with low and middle-income Australian families, and small businesses.

To howls of derision from his conservative opponents, who have accused the minority government of "cooking the books", the Treasurer pledged that one of the developed world's "strongest economies" would deliver one of its "fairest societies".

"The surplus years are here," Mr Swan said in his speech to parliament in Canberra.

"In a global economy marked by anxiety and uncertainty, our nation is a beacon of resilience."

The governing Labor party has said the budget is aimed at supporting lower-income families.

"These new measures are good for low and middle-income families because they will help them make ends meet and get ahead," Mr Swan said.

The government said there would be A$33.6bn in savings, including A$5.4bn from the defence budget over four years.

That money will be distributed to families including A$5bn in new payments to households, A$714m earmarked to help companies compete and A$3.7bn in small business tax breaks.

The country's pledge to increase spending on foreign aid from its current level of 0.35% of GDP to 0.5% of GDP by 2015-16 will also be postponed by a year.

The government is being helped by solid growth. Demand for Australian iron ore and other natural resources is expected to help boost growth to 3.25% next year.

Mr Swan also announced measures to help businesses that are not seeing the same profits as Australia's booming mining industry.

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