Wayne Swan says financial turmoil won't derail pledge to return budget to surplus by 2013

• Joe Kelly
• From: The Australian
• August 08, 2011 10:01AM

GROWING financial turmoil will make it harder to return Australia's budget to surplus, Wayne Swan says, but the government will stick to its pledge to erase the deficit by 2012-13.

The Australian share market is expected to slump this morning following the unprecedented move by ratings agency Standard & Poor's to downgrade the United States' long term debt rating.

The New Zealand share market, among the first to react to the agency's move, slumped 2.4 per cent in early trade.

The Treasurer conceded that the return to surplus by 2012-13 was made more challenging by difficult economic conditions, including lower growth forecasts from the Reserve Bank and a likely slump in business tax receipts.

“There is no doubt that things are more difficult in the economy and that makes things more difficult for the budget,” he told ABC radio.

“But the government is committed to returning the budget to surplus by 2012-13.”

The Treasurer sought a briefing on the deepening financial crisis last night from US Treasury Secretary Tim Geithner.

He said he talked to Mr Geithner about the need for a coordinated response to the crisis, but refused to provide details of the conversation.

Mr Swan said it was important for the international community to work together to weather the financial storm, which wiped $2.5 trillion off the value of international stock markets last week.

“What we have to do internationally is to make sure we work together to deal with these challenges,” he said.

“What we do need to do - particularly through forums such as the G-20 - is to work closely together if we are to avoid some of the fallout from what is unfolding, particularly in Europe.”

The Treasurer said he had spoken regularly to Australia's financial regulators, the Treasury department and international finance ministers about the world economic outlook.

He said Australia was in a strong position to cope with the financial turbulence, pointing to a report by the International Monetary Fund released yesterday.

“We can see in the IMF report that our fundamentals are strong, that our economy is being well run, that we are in the right place in the world at the right time,” Mr Swan said.

“There's not a G-20 finance minister who wouldn't swap places with me in the environment we are in at the moment.”