Australia Budget Deficit Grows to Record on Recession

The budget deficit will be A$32.1 billion ($24.5 billion) in the year ending June 30, rising to A$57.6 billion in fiscal 2009-10 as a recession that will linger through next year drives up unemployment and erodes tax receipts, Treasurer Wayne Swan said in his annual budget released today in Canberra.

Swan will reduce tax breaks, welfare payments and raise medical insurance costs for high-income earners as well as sell a record A$60 billion of bonds next fiscal year to pay for the stimulus plan. He will raise the pension age to 67 years from 65 by 2023, the first increase since the introduction of government payments to retirees in 1909, to achieve long-term savings.

“This is not an easy budget for easy times,” Swan, 54, told parliament today. “It contains the hard choices that chart the course back to surplus.”

The budget deficit forecast for fiscal 2010 is equivalent to 4.9 percent of gross domestic product, Swan said. The shortfall will hold at A$57.1 billion in 2011 before dropping to $44.5 billion in 2012 and $28.2 billion in 2013, he said.