CANBERRA (AP) ― Australia’s government said it will rein in defense spending and scale back promised increases in foreign aid as it tries to become the first major developed economy to balance its books after the global economic crisis.
Treasurer and Deputy Prime Minister Wayne Swan on Tuesday outlined big spending cuts to achieve a 1.5 billion Australian dollar ($1.5 billion) budget surplus in the fiscal year beginning July 1.
The budget deficit for the current year has almost doubled from the level forecast a year ago to reach AU$44.4 billion _ about 3 percent of Australia’s AU$1.4 trillion economy.
Swan blamed subdued tax revenue due in part to the European debt crisis and damage from record Australian flooding and storms.
The government has found AU$33.6 billion in savings, including AU$5.4 billion from the defense budget over four years.
The cuts would not effect Australia’s overseas military deployments including 1,550 troops in Afghanistan, government documents said. The government announced last week it had deferred the purchase of 12 U.S.-built F-35 Joint Strike Fighters as a cost-cutting measure.
Australia’s long-standing pledge to increase its foreign aid spending to 0.5 percent of gross domestic product by 2015-16 would be postponed by a year under the budget that needs Parliament’s approval in the coming weeks to become law.
Aid would increase from AU$4.8 billion in the current year to AU$5.2 billion next year, but remain unchanged at 0.35 percent of GDP.
Swan rejected aid advocates’ criticisms that any reduction in aid would amount to balancing Australia’s books on the backs of the world’s poorest people. He said Australia would remain in the top six most generous donor countries.
“I am exceptionally proud of what our country has done over recent years and will do over future years,” he said, referring to foreign aid.
Foreign aid advocates and the Greens party, which is crucial to the Labor Party minority government maintaining power, condemned the broken promise.
“Any deferral we see as a cut and a cut that will jeopardize up to 200,000 lives,” UNICEF’s Australian spokesman Tim O’Connor said.
But the Parliament appears set to endorse the delayed aid spending, with opposition treasury spokesman Joe Hockey announcing his conservative Liberal Party’s support.
The opposition would also consider the government’s case for defense cuts, “but cutting back on frontline defense services is not a good idea at the moment,” Hockey said.
Despite the deterioration in Australia’s government finances over the past year, Swan said the surplus could be achieved because of the strength of Asian economies including China, India, Indonesia, South Korea and Malaysia.
“Despite the best efforts of the Europeans, that has not managed to dramatically slow our regional economy,’’ Swan told reporters, referring to the European debt crisis.
“Every day someone reports that China is falling over tomorrow when it isn’t. Our regional economy is still solid and will remain so,” he said.
Swan said the big question facing the global economy was whether U.S. economic growth would continue.
“The global economy can do without Europe. It can’t necessarily do without the United States returning to strong growth,’’ Swan said.
A boom in the Australian mining industry driven by Chinese and Indian industrial demand for iron ore and other natural resources is forecast to lift economic growth from 3 percent in the current fiscal year to 3.25 percent next year.
Unemployment is forecast to rise from the current rate of 5.2 to 5.5 percent in the next two years before falling back to 5 percent.
Under the financial plan, Australia’s net debt would peak in the current fiscal year at AU$142.5 billion, 9.6 percent of GDP, which is a fraction of the debt levels of most developed countries.
A 30 percent tax on the burgeoning profits of iron and coal miners which comes into effect on July 1 is forecast to raise AU$3 billion in the next fiscal year and AU$3.5 billion the following year.
This revenue would help pay for increased benefits for poorer Australians from July, 2013 _ weeks before federal elections are due.
A carbon tax which will take effect from July 1 is expected to dampen economic and employment growth by less than a quarter of a percentage point during the next fiscal year.
Australia’s worst industrial polluters will have to pay AU$23 for every metric ton of carbon gasses that they emit. Carbon tax income will be returned to poorer households to help them cope with higher prices and to companies to help them introduce lower carbon technologies.
The budget also included tax concessions for loss-making businesses outside the resource sector who are struggling against a high Australian currency.
