Govt ‘will do what’s needed’ for surplus

PRIME MINISTER Julia Gillard says the government has a clear plan to bring the federal budget back to surplus and will exert the fiscal discipline necessary to meet its target.

Treasurer Wayne Swan will hand down a mid-year budget review by the end of December.

However, it may look more like a mini-budget because of the likely size of the savings needed to meet the promised surplus in 2012/13.

Labor has projected a surplus of $3.5 billion for the year, but last week it warned changing global economic circumstances have made that task harder.

“You will see a continuation of the government’s strong approach to fiscal consolidation,” Ms Gillard told journalists at the APEC meeting in Hawaii on Sunday.

Independent forecaster Deloitte Access Economics has estimated the expenditure-cutting task could be as high as $5.5 billion to reach the pledged $3.5 billion surplus.

The federal government was still working on its Mid-Year Economic and Fiscal Outlook (MYEFO), and Ms Gillard declined to respond to reports its expenditure review committee had last week signed off on the cuts last week.

“The last thing I am going to do with MYEFO is play a rule-in, rule-out game,” she said.

But Ms Gillard, who is seeing a rebound in the opinion polls, said the interests of “working people” were a key factor of consideration for the government.

“It was the approach we took to the last budget and it will continue to drive us,” she added.

Opposition treasury spokesman Joe Hockey said the potential for a mini-budget, almost six months after the annual May budget, showed how “chaotic” the government’s budget process had become.

“Suddenly it appears Wayne Swan can now find savings, something he could not do six months ago when he handed down the budget,” Mr Hockey said on Monday in a statement.

Australian Greens Leader Bob Brown said the government didn’t need to make any massive cuts.

“It should avoid large-scale spending cuts because they are unnecessary,” Senator Brown said in a statement.

Meanwhile, Australian Bureau of Statistics (ABS) released new data on Monday showing the annual cost of living was rising by more than inflation.

Its cost of living index for employees rose by 3.9 per cent over the year to September.

The cost of living index for pensioners increased by 4.1 per cent, while for self-funded retirees it rose by 3.8 per cent.

In contrast, the latest consumer price index, released in October, showed annual inflation at 3.5 per cent in the September quarter.

Mr Hockey said the numbers showed families were under pressure.

“This is not the time for a new carbon tax on Australian families,” Mr Hockey said.

The need to make larger budget spending cuts as slowing economic growth puts a dent in revenues comes as the government sees the beginnings of a turnaround in its political fortunes.

The latest Nielsen poll published on Monday shows while the coalition retains an election-winning two-party lead at 55 per cent to 45 per cent, Labor is drawing closer.

Ms Gillard is now almost level with Mr Abbott as preferred prime minister, at 39 per cent to 41 per cent.

“People have come to realise that as an alternative prime minister Tony Abbott needs to say more than ‘no, no, no, no, no’,” Trade Minister Craig Emerson told ABC Radio from Hawaii