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Budget surplus revised to $5.2-billion -

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Budget surplus revised to $5.2-billion

The World Today - Wednesday, 5 November , 2008 12:22:00

Reporter: Sabra Lane

ELEANOR HALL: The Federal Treasurer has unveiled the Government's Mid-Year Economic and Fiscal
Outlook, and it's dramatically revised down the size of Australia's surplus for the current
financial year.

In the May budget, it predicted a $22-billion surplus, but Wayne Swan says the global economic
crisis is buffeting the Australian economy, and the surplus has being revised to $5.4 billion.

Mr Swan says the Government is determined to increase pension payments but aside from that, it's
reviewing all its spending commitments.

The Treasurer says it will have to cut its cloth, to suit the circumstances.

In Canberra, Sabra Lane reports.

SABRA LANE: For weeks the Government hasn't wanted to specify how the global financial crisis had
affected the Australian economy, this morning Treasurer Wayne Swan admitted it's given the country
a walloping.

WAYNE SWAN: But what has been absolutely dramatic, in driving the surplus' down have been the
changes to revenue.

The global financial crisis, has smashed $40-billion out of projected surpluses. It's hit
$40-billion worth of potential tax revenue.

SABRA LANE: In short, the budget surplus for this financial year has been slashed from $22-billion
to just over five-billion.

Growth has also been revised down three quarters of one per cent, to two per cent.

Unemployment will rise, by the end of June next year it's expected to be around 5 per cent, jumping
to five and three quarter per cent by June 2010.

The media was given only a two page briefing note before Wayne Swan held a press conference this
morning to detail the figures.

He was asked about revised inflation figures, as the briefing note contained no information about
them.

WAYNE SWAN: Well all of our forecasts are there for you to digest Laura.

(Sound of commotion from reporters)

WAYNE SWAN: Okay, well it's coming out, okay.

REPORTER: Why have we not got the statement?

WAYNE SWAN: The statement's coming out, and you're going to get a briefing from Treasury and I'm
happy to make myself as available, this is a statement that is delivered at a normal time, six
months from the previous budget within a few days, and you're welcome to go through everything in
great detail.

SABRA LANE: He fumbled for a minute before finding the answer.

WAYNE SWAN: CPI (Consumer Price Index), three and a quarter in the budget, 3.5 MYEFO.

The drastic revision down of the surplus is due to a drop in demand for Australia's commodities, a
drop in company tax and a huge fall in capital gains tax, because of the share market plunge.

Mr Swan says some families will find the coming months tough. And it'll be tough going too for the
Government too, with the Treasurer promising to quarantine only one promise into the future.

WAYNE SWAN: Firstly, we are committed to pension reform, we made that clear, but as regards what we
can do, whether it comes to infrastructure, whether it comes to reform of Federal-State relations,
or a whole host of other areas, there are tough decisions that must be taken.

SABRA LANE: But the Treasurer made it clear the Government was keeping its election promises to
date.

WAYNE SWAN: Oh look, we've got to go back and have a look at everything, but we have implemented
all of our election commitments in the context of the last budget, we do have ambitious plans
across a range of areas, we are going to have to cut our cloth to suit the circumstances.

I've made it clear that the commitment to pension reform is one that we are proceeding with in the
timetable that we indicated we were following and that remains the case, but there are a large
number of other areas which we are ambitious to proceed in, in which we will have to take tough
decisions and make tough choices.

SABRA LANE: While Mr Swan says the nation's growth should remain positive over the cycle, he says
he doesn't know if the global financial crisis will have a further impact on the nation's fortunes
and send the budget into deficit in any quarter.

WAYNE SWAN: Well we're not forecasting going into deficit in any single year, but I've made it very
clear if international conditions were to further deteriorate, that would have an impact on future
surpluses.

But it's not my job to speculate about that.

SABRA LANE: The Government had promised to set aside $76-billion over coming years for its three
investment funds, for infrastructure, health and education.

But because of the downturn in terms of trade and tax takings it may have to revise down the size
of those funds and re-think its much promised COAG (Council of Australian Governments) reform
agenda.

WAYNE SWAN: There is the, the COAG agenda, that'll be tough, there is a variety of other reports
before the Government, and of course there is infrastructure expenditure as well, we've made it
pretty clear that-

REPORTER: So a scale back?

WAYNE SWAN: Well, I'm not going to forecast what we're doing in each individual case.

SABRA LANE: Shadow Treasurer Julie Bishop.

JULIE BISHOP: The Government is blaming everything on the global financial crisis, now of course
Australia's not immune from the impacts of the global financial crisis but conditions have been
made worse in this country because of the Government's misreading of the economy throughout the
year, and the Government says everything is on the table, well that's just code for saying that
they're going to go back on whatever they said that they would do and they are now going to say
because of the global financial crisis they are permitted to move a long way from responsible
fiscal management.

ELEANOR HALL: Shadow Treasurer Julie Bishop ending Sabra Lane's report.