Prime Minister Julia Gillard is set to announce a $12 billion shortfall in tax revenues for 2012/13. Source: AAP
THE International Monetary Fund (IMF) isn't overly concerned about Australia's weaker fiscal position, after Prime Minister Julia Gillard warned of an even greater shortfall in government revenue.
Ms Gillard told a conference on Monday that revenue in 2012/13 would be $12 billion less than forecast because of the continued strength of the Australian dollar.
"The persistent high dollar, as well as squeezing exporting jobs, also squeezes the profits of exporting firms. With lower profits for these companies comes lower company tax going to government," she told the Per Capita forum in Canberra.
She said the government wouldn't cut the budget to the bone in response, but warned that every "reasonable" option was now on the table, "even options previously taken off the table".
As Finance Minister Penny Wong told ABC radio Australia was facing "a new economic reality", Opposition Leader Tony Abbott accused Labor of just making excuses.
Shadow treasurer Joe Hockey said the government would still be receiving $25 billion or 7.6 per cent more revenue than in 2011/12.
But the IMF said while Australia's fiscal position was now weaker than expected, it was not a concern because of the country's low level of debt.
IMF director for Asia and the Pacific Anoop Singh said with debt levels at just 10 per cent of gross domestic product (GDP), Australia was one of very few countries with triple-A sovereign debt ratings from the three major credit ratings agencies.
"The next budget will lay out the government's plan to achieve a strong fiscal position ... essentially the government has remained keen to return the budget to surplus, and this is a praiseworthy objective that we have supported," he told a news conference in Singapore.
As well, the IMF's Regional Economic Outlook for Asia and the Pacific, released on Monday, said the Australian economy should return to trend growth in 2014, despite the damage being caused by a high Australian dollar.
But Australian Industry Group chief executive Innes Willox said the erosion of the budget bottom line should be seen in the context of declining business activity and a slowing economy.
"The major parties should avoid plans for tax increases or spending cuts that would worsen the outlook for this already slowing economy," he said in a statement.
TD Securities head of Asia Pacific research Annette Beacher has upgraded her forecast for the 2012/13 budget deficit.
It's now seen closer to $25 billion - or 1.7 per cent of GDP - compared to an earlier prediction for a $10-$15 billion shortfall.
"Clearly revenues rely too heavily on corporate taxation and not enough on personal taxation, a legacy of the prior Howard-Costello government," she said in a note to clients.
"This structure needs to change."
However, even a $25 billion deficit would be a marked improvement on the $43.7 billion deficit posted in 2011/12 and the $47.7 billion deficit in 2010/11.
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