CANBERRA, Australia – Australia's chief finance minister said Tuesday that his budget blueprint for the next fiscal year will maintain a credible path to an eventual surplus despite China's slowing economy and weak commodity prices.
Treasurer Joe Hockey said his budget to be unveiled to Parliament on Tuesday will stick to a timetable he announced in December of delivering a surplus in the 2019-20 fiscal year despite a slump in the price of iron ore, Australia's most lucrative export.
Hockey said the deficit for the current fiscal year ending June 30 would be smaller than the 40.4 billion Australian dollars ($32 billion) forecast in December. That forecast was more than AU$10 billion larger than was forecast a year ago.
"Market expectations are focused on a budget deficit of around AU$40 to AU$41 billion dollars — we're going to beat that and we're going to beat that every year," Hockey told reporters at Parliament House hours before he was to reveal the budget.
The government must delicately balance the need to rein in the deficit without stalling an economy that is slowing in the aftermath of a mining boom that kept Australia out of recession during the global financial crisis.
Australia's central bank cut the benchmark interest rate to a record low 2 percent last week in a bid to jolt the economy. Unemployment rose to 6 .2 percent last month.
There is also a political imperative for Prime Minister Tony Abbott's conservative government that its second budget is more popular than its first.
Last year's budget was widely seen as unfair and was blamed for a decline in business confidence in the months that followed. A hostile senate blocked key money-saving measures.
Abbott survived a challenge to his leadership from within his ruling party in February in response to the coalition government's poor opinion polling. He risks a second challenge if another unpopular budget is stalled in the senate.
China's slowing economy and the fall in prices of iron ore and coal that feed Chinese industry have forced the government to scale down its revenue expectations over the next four-year period.
"In the last 18 months, we've had to write off AU$90 billion of expected revenue, but yet we are still on a credible trajectory back to surplus," Hockey said. "In fact, the trajectory is not different to that that I announced at the end of last year," he said.
Hockey would not comment on a report in News Corp. newspapers on Tuesday that a centerpiece of the budget will be 1.5 percent tax cut to unincorporated small businesses which will reduce their tax burden to the lowest levels since 1967 — 30 percent.
The Australian government posted budget surpluses thanks to the mining boom for several years until the 2008 global financial crisis demanded stimulus spending to keep the AU$1.7 trillion economy growing. However Australia's debt level remains relatively low compared to other wealthy countries.