Economists are relieved the Federal Government is abandoning its push for a surplus, labelling it a sensible, pragmatic and realistic decision.
For months, they have been concerned the Government's penny-pinching to keep the surplus dream alive had the potential to slow growth and jobs.
On Thursday, Treasurer Wayne Swan .
The latest official figures from the Department of Finance show cash receipts for July to October are almost $4 billion less than forecast in the May budget.
"At this stage I don't think it would be responsible to cut harder or further in 2012-13 to fill a hole in the tax system if that puts jobs or growth at risk," Mr Swan said.
The Opposition says this proves what it had been saying all along, that Labor would never deliver a surplus, describing the announcement as humiliating and embarrassing.
But business leaders, market economists and some in Labor's own ranks had been urging the Government to walk away from its pledge.
Leading economist Chris Richardson says ditching the surplus is a triumph of common sense.
"The alternative, to keep cutting to get a surplus this year, would have hurt the economy," he said.
"It's already starting to hurt the economy.
"So a sensible decision.
I'm glad it's been taken." JP Morgan chief economist Stephen Walters also welcomes the announcement, and he says a return to surplus in this economic cycle is hard to argue against.
"But I think what a lot of people, including myself, had some issues with was why we need to rush to do it within the next six months," he said.
Mr Walters says the Treasurer has done the right thing to allow the "economic stabilisers" to kick in.
"Rather than intervene...
and try to squeeze revenue from previously untapped sources or trying to slash expenditure to try to make the books balance, you essentially let current policy settings stand and allow whatever the implications are to your revenue to unfold," he said.
"And as the Treasurer says, they're already down by about $20 billion, and just in this fiscal year alone on your revenue side, to October they're down by $4 billion.
"Now essentially rather than trying to reverse that, you just let that play out and essentially end up with a deficit rather than a surplus.
"It's a very simple equation; it's just politically clearly very difficult for the Government to admit that they're not going to make it." Political outcomes The problem for the Government is it has spent the past two-and-a-half years promising a surplus as a demonstration of its economic credentials.
Now Mr Swan says the economy comes before politics, stressing the Government has delivered responsible economic management for the past five years.
"At the end of the day, I don't care about the political outcomes, I care about the economic outcomes," he said.
The Opposition is crowing, having long taunted the Government that it would never deliver a surplus.
Opposition Leader Tony Abbott and shadow treasurer Joe Hockey blame the Government, not the global economy.
"For three years they've been boasting of this surplus," Mr Abbott said.
"For three years, they've been saying that this surplus was the badge of their economic credibility.
"Well, they don't have it anymore." The Opposition says the Government should have delivered a surplus, and that if elected it would deliver a surplus.
"The budget comes with a big fat made-in-China stamp," Mr Richardson said.
"It doesn't matter which politician in Canberra promises what; if China has a bad year, the budget's going to have a bad year.
"To pretend otherwise is dumb." There is a slim chance the Government's resignation to recording another deficit will mean Australia loses its top credit rating with the world's major rating agencies.
Saul Eslake, chief economist with Bank of America Merrill Lynch, says that may not be a bad thing in that it would be helpful in bringing down the dollar.
"It may be that the Government's abandonment of its commitment to a surplus raises eyebrows in the financial markets and reduces the capital inflows into Australia that have kept the dollar at elevated levels," he said.
"If that were to happen, I think the Reserve Bank would be much mess inclined to lower interest rates further than they probably are at the moment."