Australia will fall into a budget deficit this fiscal year as companies pay less tax and spending to stimulate the economy increases, Treasurer Wayne Swan said, Bloomberg reported.
Corporate tax receipts will probably decline by A$50 billion ($32 billion) in the next four years as the domestic economy cools and demand from China for commodities wanes, Swan told the Nine Television Network today.
Swan and Prime Minister Kevin Rudd are weighing stimulus measures to cope with the weakest economic growth in eight years and stalling household spending. After distributing A$10.4 billion of handouts in December, the government may boost outlays on infrastructure projects such as roads rather than bring forward tax cuts scheduled to take effect in July, Swan said.
"Because of the unwinding of China, the global recession, it will be inevitable that Australia has a temporary budget deficit," Swan said. "Generalized tax cuts don't provide the sort of immediate stimulus that is required in an economy which is suffering a sharp shock."
In November, the government cut its budget surplus forecast to A$5.4 billion for the year ending June, down from a prediction of A$21.7 billion in May, as it distributed the A$10.4 billion to the elderly, families and first-home buyers.
The Opposition Liberal Party, which can team with minor parties to block government measures in the Senate, doesn't object to fiscal policy going into deficit.