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Australia vows to be world's first back in surplus

10 may 2011, 18:52
Australian Treasurer Wayne Swan at Parliament House in Canberra. REUTERS/Daniel Munoz©
Australian Treasurer Wayne Swan at Parliament House in Canberra. REUTERS/Daniel Munoz©
Australia on Tuesday vowed to be the first advanced economy to return its budget to surplus after the global financial crisis, saying it will be "back in the black" within two years, AFP reports.

Treasurer Wayne Swan is set to release an austere, belt-tightening budget Tuesday evening to haul in a reported Aus$50 billion (US$54 billion) deficit, in part created by stimulus spending during the worldwide slump.

"Tonight's budget will get us back in the black," Swan told reporters, saying that forward estimates would show a return to surplus in 2012/13.

"We will come back to surplus before any other major advanced economy."

Resource-rich Australia, with its strong banking system and wealth of natural minerals, survived the crisis better than most and was the first advanced economy to lift interest rates in its wake.

As it prepares for the next stage in the Asia-driven mining boom, interest rates are at 4.75 percent and unemployment at 4.9 percent.

Despite the upside of the commodities boom, massive summer floods and a monster cyclone are weighing on expenditure and will force sharp cuts when the national accounts are released, Prime Minister Julia Gillard has said.

As her centre-left Labor government flails in opinion polls, Gillard said the tough accounting could prove unpopular.

"This budget won't be about buying your vote," she wrote in a commentary for The Australian newspaper on Monday. "The cutbacks will be clear."

Gillard said the enduring effects of the global financial crisis and natural disasters had hurt government revenues, while business had suffered from consumer caution and the impact of the high Australian dollar.

The Aussie, which reached parity with the greenback in October and has continued to climb since, is increasingly making life difficult for export industries such as manufacturing, tourism and education, she said.

Meanwhile, the historic floods, which wiped out crops and shut down coal mines in Queensland, and which the government has said slashed Aus$9 billion from economic output, would place additional strains on funding.

But global demand for Australia's iron ore, coal and gas is expected to help unemployment drop to 4.5 percent within two years.

The downside will the possibility of higher inflation.

The budget is likely to toughen up welfare rules and push some long-term unemployed back to work although the government has said that priority areas such as education and mental health will receive a boost.

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