Australia’s Budget Will Produce ‘Substantial’ Savings, Treasurer Swan Says

Australia’s budget will make “substantial” savings after revenue was crimped by a record exchange rate, the nation’s costliest natural disasters and Japan’s earthquake, Treasurer Wayne Swan said.

Swan, who delivers the budget to Parliament tomorrow, said yesterday the deficit in the government’s finances will widen in the fiscal year ending June 30 before increased mining revenue and an improving economy help bring about a surplus in 2012-13.

Prime Minister Julia Gillard’s administration has revealed the budget will tighten welfare payments to get people back into the workforce and cut 1,000 jobs in the civilian defense industry in the next three years. The government also aims to stop high-income earners receiving a subsidy for having private health insurance.

“This budget is tough and it will keep spending tight, give incentives to companies to create more jobs,” Craig James, senior economist at Commonwealth Bank of Australia in Sydney, said in a phone interview yesterday. “There won’t be much in it for people, although treasurers have a habit of pulling rabbits out of hats.”

The government, which steered Australia through the global financial crisis, is trying to emphasize its economic management skills as its popularity declines over plans to impose a tax on mining companies’ profits and charge polluters in order to reduce greenhouse-gas emissions.