The Federal Government has all but dumped its promise to deliver a budget surplus this financial year, arguing the move will help protect the economy and jobs in the face of falling tax revenue.
Treasurer Wayne Swan made the announcement after new figures showed a $4 billion write down in tax revenue during the first four months of the financial year.
"Obviously, dramatically lower tax revenue now makes it unlikely that there will be a surplus in 2012-13," he told reporters in Canberra this afternoon.
"It's not because the Government is spending too much, it's because we didn't collect the amount of taxes that we expected to collect.
"If we were to fill a temporary hole in taxation with further cuts, that would impact upon growth and jobs, and that wouldn't be the responsible thing to do in these circumstances." The show a budget deficit of $12.3 billion at the end of October, about $2.7 billion worse than where the Government had expected to be at that time.
When the Government delivered the Mid-Year Fiscal and Economic Outlook (MYEFO) in October, it forecast a budget surplus of $1.1 billion for the full year 2012-13.
Mr Swan has declined to speculate on the magnitude of any deficit.
"At the end of the day, I don't care about the political outcomes, I care about the economic outcomes," he said.
"And the responsible course of action here in terms of the economic jargon is to let the automatic stabilisers work on the revenue side of the budget." 'Right thing' Many market economists had been urging the Government to abandon its "political commitment" to a surplus this year, and have this afternoon welcomed the change in policy.
"The Government has done the right thing to drop (its) surplus commitment," AMP Capital chief economist Shane Oliver said.
"Undertaking more fiscal austerity just to get a surplus would have been a disaster for the economy." An international analysis of Australia's economy released by the Organisation for Economic Cooperation and Development (OECD) last week urged the Government to take a flexible approach to the surplus timeline.
There had also been growing calls, including from within Labor ranks, for the Government to push out the timetable for returning the budget to surplus.
Senior Labor MP Joel Fitzgibbon last week argued it would be good for the economy.
But Prime Minister Julia Gillard responded to that comment by pointing to the most recent forecasts which showed the budget going back in the black in 2012-13.
In July, Ms Gillard said: "Look at our decisive action in the global financial crisis: we saved jobs, stayed out of recession and got back to surplus." Last month, Ms Gillard said the Government was "on track" to deliver a surplus in 2012-13.