Strong dollar hits government revenue

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Moderator: sledge

Strong dollar hits government revenue

Postby sledge » Mon Nov 08, 2010 6:58 pm

Our Aussie Dollar going higher. :salute:

The Federal Government will today release a budget update showing a $10 billion revenue shortfall caused by the muscular Australian dollar.

The Government will also use its mid-year economic and fiscal outlook to unveil a range of spending cuts to help the budget return to surplus as promised in 2012-13.

Treasurer Wayne Swan is expected to announce more than $3 billion in cuts, most of which were revealed during the election.

For several days the Government has been forecasting the impact the rising Australian dollar will have on government revenues.

"Now obviously when you've got a dollar that's at parity, or thereabouts, that's going to impact on Government revenues," Finance Minister Penny Wong said.

"The Government's finances are in good shape, the economy is strong, the budget's in good shape, but the soaring Aussie dollar is going to deliver a hit to Government revenue."

Despite the revenue shortfall, Senator Wong is adamant the Government remains on track to return the budget to surplus.

The ABC understands the promised surplus for the 2012-13 financial year will fall somewhere between $1 billion and $3.5 billion.

"I think that the Government has made clear that we will deliver on our fiscal strategy," Senator Wong said.

"That is, you know, ensuring that there's a restraint on spending growth, that we offset what we spend and that we deliver the surplus that we committed to prior to the election."

The Government has already confirmed that its cleaner cars initiative will be delayed by six months, pushing it out of this year's budget.

It is expected a total of $3.4 billion will be saved, but much of it stems from cuts promised during the election campaign.

Opposition finance spokesman Andrew Robb says it will be a test of the Government's character.

"Will they show the courage and the discipline to make serious cuts to their spending and borrowing or will they take the low road and sit back waiting for Chinese demand of our coal and iron ore and new taxes to balance the books?" he said.

"Already we're seeing an increase in the exchange rate, which was able to be anticipated, now being used as an excuse."

Mr Robb says it is disingenuous to blame the soaring dollar for the smaller-than-expected revenue.

"This Government was misleading the Australian public before the election," he said.

"It used in the budget 90 cents against the US dollar to frame the budget.

"A few weeks later when they were trying to introduce a mining tax and show that it would raise a lot of money, they used 85 cents in the US dollar.

"If anything it should have been higher and higher. Everyone knew that we were appreciating against the US dollar."

Economic growth

Economists say the Government must reaffirm its commitment to a budget surplus by 2013 in today's update.

Colonial First State's head of investment markets research, Stephen Halmarick, says stronger-than-expected economic growth could see a surplus return even sooner.

"The economy may end up being a little bit stronger than the Government has estimated," he said.

"Budget revenue is really affected by nominal GDP growth and if we continue to see really good signs there, it is conceivable we could get the budget back into surplus a year earlier."

http://www.abc.net.au/news/stories/2010 ... 060832.htm

They say that the high dollar is hurting tax revenue. Those businesses that export and depend on a cheap Aussie dollar.
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