Trading Room home page

Swan resets budget after tax sledgehammer

Market watch top headlines

Australian reports

World reports

Stocks to watch



December 20 2012, 4:58PM

Treasurer Wayne Swan promised the nation's books would be "back in the black" in 2012/13.

But now he's backtracked to declare a surplus is "unlikely" following a "sledgehammer hit to tax revenues created ongoing uncertainty in the international economy."

The first key Treasury figures on company taxes released on Thursday tell a story of companies reporting lower profits and miners suffering the double-whammy of soft commodity prices and a high Australian dollar.

Federal tax coffers have taken a $4 billion hit in the financial year-to-date so far - and the coming months don't look promising either.

In the upcoming 2013 election year, the government has promised to roll out trial sites for the National Disability Insurance Scheme and pump much-needed funds into the school system in the wake of the Gonski review.

But there's also a real prospect if more government money is taken out of the economy - through greater spending cuts to achieve what some describe as a "political" surplus - companies will start to go under and thousands of jobs will be lost.

So Mr Swan says he's decided to put jobs ahead of the long-promised surplus.

The opposition says it's another broken promise - after Labor's 2010 election pledge not to introduce a carbon tax - and a sign the government can't ever be trusted.

Coalition Leader Tony Abbott will hammer the government over the budget through to the election, which the opposition looks likely to win if the polls continue to reflect the current trend.

However, Swan has already hinted at how Labor will sell the budget back-flip to voters.

"If the worst thing people say is we got the economics right again but fell short on the politics, I would say, so be it," he said.

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

And, he's held out the prospect that the budget slippage could be temporary, pending a fresh assessment by Treasury in the new year.

In 2013, it will be up to voters to determine whether ditching the surplus is economic mismanagement or a necessity to save jobs.

By Paul Osborne, AAP Senior Political Writer