Australia government plans big budget cuts: report

Source: Agencies  |   2008-12-22  |     ONLINE EDITION

AUSTRALIA'S centre-left government is planning millions of dollars in budget cuts to combat the deteriorating financial outlook and meet economic stimulus promises, the Australian newspaper said today.

Prime Minister Kevin Rudd had appointed a so-called budget "razor gang" of ministers and senior finance officials to prepare an austerity drive, Finance Minister Lindsay Tanner told the Australian newspaper in an interview.

"The choices we're facing are tougher than we expected," Tanner reportedly said.

"Because of the changed circumstances and the increased pressure on finding savings, we decided it was simpler to absorb that process into the ordinary budget process."

Treasurer Wayne Swan last month warned the global financial crisis had poked a "US$40 billion hole" in expected tax receipts over the next four years.

The Treasury Department is still forecasting a budget surplus in 2008-09 after the government announced a A$10.4 billion (US$7 billion) stimulus package and A$27 billion worth of new spending on infrastructure.

Cuts were not expected in consumer-sensitive budget areas like welfare, taxation and family support to avoid counter-acting against the impact of stimulus measures.

Tanner expected at least A$200 million a year in savings from a streamlining of government IT systems, the Australian said.

The independent Reserve Bank of Australia has cut its 2008 economic growth forecast to 1.5 percent from 2 percent, while slashing benchmark interest rates by 3 percentage points since September to 4.25 percent.

Tanner said it was clear from early preparations for the 2009-10 budget, to be handed down on May 12, that the short-term economic landscape was the least certain for many years.

The slowdown threatened government plans to boost spending on pensions, higher education, defence, homelessness, quarantine and innovation, and create a system of paid maternity leave.

"Although you can't do everything all at once in this game, clearly there are expectations in those and other areas that we will be taking initiatives in the not-too-distant future," Tanner told the newspaper.

The razor gang would make recommendations to an Expenditure Review Committee of senior ministers early next year, with Rudd having warned colleagues to expect savings measures, he said.