Swan vowed an ambitious A$33.6 (B1 trillion) billion in savings, slashing A$5.5 billion (B172 billion) from military spending and trimming Australia’s overseas aid by A$2.9 billion (B90 billion), along with a raft of other reforms to tax and welfare benefits.
The measures will only deliver a modest A$1.5 billion (B47 billion) surplus for the 2012-13 fiscal year starting July 1, but the Labor government has been determined to return the budget to black in a bid to salvage its popularity.
“Tonight we make a forceful statement that ours is one of the world’s strongest economies,” Swan said in his budget speech.
“The deficit years of the global recession are behind us. The surplus years are here.”
The budget forecasts a surplus of A$7.5 billion by 2015-16, a dramatic reversal of the present A$44 billion deficit requiring some of the deepest cuts to government spending seen in Australia for decades.
Defence was the major target, with A$5.5 billion in spending cut over the next four years, including a delay in the acquisition of 12 F-35 Joint Strike Fighter aircraft, scrapping some artillery purchases and sacking 1,000 civilian staff.
The government vowed there would be “no adverse impact on operations in Afghanistan” or East Timor and the Solomon Islands, where Australian troops are stationed in a peacekeeping capacity.
Overseas aid was also sacrificed, with A$2.9 billion in savings through the scaling back of development targets which Foreign Minister Bob Carr said would see funding “grow at a slightly slower rate” than forecast.
Australia was the only advanced nation to dodge recession during the global downturn due to the resilience of its mining exports to Asia, and it again leads the major economies by becoming the first to record a budget excess.
Swan said the surplus was a key buffer against renewed turmoil in Europe, where French leader Nicolas Sarkozy and the Greek government were unseated at weekend elections, threatening eurozone austerity plans.
“In these uncertain times there’s an absolute premium on clear and credible fiscal policy and that’s why the government has charted this course,” he told reporters, adding that the “conditions demand a surplus”.
“Every area of government spending has, in one way or another, been reined in in this budget.”
Swan said Europe continued to cast a pall over the global economy, but he expected the Asian region to remain prosperous and buoy Australia, with some A$450 billion in mining sector investment slated for coming years.
Australia is forecast to grow by 3.25 per cent in 2012-13 and 3.0 per cent in each of the three following years.