A Budget for Tough Times: Swan

Added by David Sandercock on April 4, 2011

Despite natural disasters affecting revenue, Treasurer Wayne Swan says he is determined to bring the Australian budget back to surplus in the 2012/13 term.

Reports by the Treasury reveals that Japan’s earthquake and tsunami last month are likely to affect export earnings negatively by some $2 billion in 2010/11. Mr Swan, who commented on the report, told reporters “The tragic events in Japan – together with the impact of floods and cyclone Yasi at home – will clearly mean revenues take a substantial hit in the near term.”

Japan is Australia’s second-largest export market for coal and iron-ore and exports will be significantly reduced due to damage and destruction to six of the main ports handling non-rural bulk commodities.

In addition, damage to five of Japan’s coal-fired power stations and severe disruption to several steel-making facilities is expected to reduce output by some 10 to 20 percent compared to pre-earthquake figures.

As a result of the quake and tsunami, world prices of coal and iron-ore fell by eight and six percent respectively and have not yet recovered.

“As such, Australia’s export earnings may be lower in the short term due to both volume and price effects,” the Treasury said.

However, it is thought that about one-third of the loss will be recouped during future quarters as export volumes recover and Mr Swan, who is presenting his fourth budget on May 10, said he is determined to bring the budget back to a surplus, despite “framing the budget in really tough circumstances this year.”