The Federal Government’s budget deficit for the 2012 financial year has come in slightly lower than the May estimate.
Treasurer Wayne Swan said this morning the underlying deficit was $43.7 billion, below the $44.4 billion predicted in May.
However, he also warned the slowdown in resources will hit government revenue.
“This will hit government revenues significantly, which does make it harder to deliver a budget surplus,” he said.
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“It does mean we’ll have to find more savings.”
Australian government net debt was 10% of GDP at $147.3 billion, while as a share of GDP, the deficit was down from 3.4%.
“Australia’s public finances remain among the strongest in the world, in large part due to the decisive actions taken to avoid recession and the strict fiscal discipline delivered by the government,” the Treasurer said.
“While the decline in commodity prices in recent months will inevitably make it more difficult to return the budget to surplus in 2012/13, the government remains committed to doing so.”
Falcon production almost stopped
Confidential documents devised at the peak of Australia’s automotive industry crisis reveal Ford may have halted production on its iconic Falcon without financial assistance, according to The Australian Financial Review.
Almost 40 documents, memos and briefing notes from the automotive industry’s lobbying campaign for subsidies were obtained by the newspaper under the Freedom of Information Act and they reveal future of General Motors Holden in Australia was in doubt when state and federal governments agreed to a $275 million bailout.
The newspaper did not publish the contents of the documents, which were inadvertently provided without redactions.
Reserve Bank under increasing pressure to cut rates
The Reserve Bank will face pressure to cut interest rates if global commodity prices keep falling, and if central banks continue to pump billions of dollars into the world’s financial system, UBS strategist Matthew Johnson has warned.
Johnson said the link between commodity prices and the global money supply had broken down, while Australia’s dollar has continued to rise as central bank balance sheets have expanded.
He said the more central banks expand their balance sheets the more pressure will be on the Reserve Bank to cut rates, as Australia can no longer rely on rising commodity prices to counter the effects of a rising dollar.