Australia's government sought to woo back disillusioned voters with a pre-election budget today, reining in spending, vowing a quick return to surplus and affirming its determination to hit miners with a new tax.
The budget offered a more upbeat assessment of the Australian economy with forecasts for stronger growth on the back of resilient resources demand from China and India, lower unemployment, subdued inflation and a small surplus by 2012-13.
But with elections due within six months, the budget raises the stakes in the government's fight with miners over a 40 per cent profits tax, to start in July 2012, with treasurer Wayne Swan saying he was determined not to back down on the tax.
"We need to manage our resource wealth more sustainably, capturing a fairer share for all Australians and turning it into other forms of wealth that last," Swan said in his budget speech.
Prime minister Kevin Rudd, first elected in late 2007, has been riding high in opinion polls until recent weeks but quickly lost support after policy blunders and reversals, and recent surveys showed he could even lose the election.
He has used the budget to counter opposition accusations he is a tax-and-spend prime minister, and that his plan to tax the booming mining industry makes him Australia's version of controversial Venezuelan leader Hugo Chavez.
The smaller deficit, a faster return to surplus and forecast for subdued inflation in the years ahead, could also ease concerns that further government spending could prompt further rate hikes, increasing the burden for households in a country where home ownership is a national obsession.
The Reserve Bank of Australia has lifted rates by 150 basis points to 4.5 per cent since October and markets are pricing in two more rises by the end of the year.
Reuters