Australia set for 'modest' budget surplus

Australia is on track for a modest budget surplus, Treasurer Wayne Swan said Sunday ahead of this week's unveiling of his fifth budget for the mining-powered economy. Australia, which survived the global financial crisis without dipping into recession, has previously been forecast by the government to deliver a Aus$1.5 billion (US$1.6 billion) surplus for the 2012/13 fiscal year beginning July 1. In releasing its mid-year figures late in 2011, the government said it expected the deficit to balloon to Aus$37.1 billion for the 2011/12 fiscal year. "It will be a modest surplus, the surplus will build over time," Swan said Sunday. Swan acknowledged the task had been made more difficult by revenue writedowns of Aus$150 billion over the past five years, and the budget was expected to contain significant belt-tightening. "The aftershocks of the global financial crisis have hit our revenues," Swan told the Nine Network. Australia is benefiting from low unemployment and a mining and resources investment boom -- factors that have helped persuade the government that "returning the budget to surplus is the right thing to do." "A budget surplus is the clearest sign we can send of the strength of the Australian economy," Prime Minister Julia Gillard said Sunday. "It's the right thing to deliver a budget surplus, so we create a buffer if the global economy worsens at some time in the future." But the government admits that while Australia's economic fundamentals are strong, the economy is in transition, which is making life tough for businesses outside the mining sector. Gillard said while the economy -- which is driven by huge demand from Asia for raw materials such as iron ore and coal -- was strong, the high Australian dollar and rising energy costs were making some sectors struggle. "We understand this isn't everybody's boom," she said. The budget to be released on Tuesday comes amid mounting speculation that Gillard, who is performing dismally in opinion polls, will face a challenge to her leadership from within Labor's ranks. Swan dismissed the question. "The prime minister is as tough as nails, and she ain't going anywhere," he said.