SYDNEY —Australian Treasurer Wayne Swan on Sunday warned of a "dramatic" hit to the government’s bottom line due to commodity price falls, steeling consumers for an austere budget in an election year.
Mr Swan said the government’s revenue had taken a "massive hit" from a plunge in its terms of trade — the value of exports measured against imports — with prices for its key mining products down but the Australian dollar remaining high.
"This has contributed to subdued price pressures and weaker profitability across the economy, which means that nominal GDP (gross domestic product) — the value of the goods and services we produce — has grown more slowly than real GDP for three straight quarters," said Mr Swan in his weekly economic note.
"This run is unprecedented since records began."
Mr Swan said revenues were A$6bn ($6.24bn) lower than had previously been forecast for the first seven months of the financial year to June 30, "primarily due to the impact of lower corporate profits". He is due to hand down the budget in May.
"While revenue has taken a big hit, the monthly financial statements also show that government expenditure is running slightly below our forecasts," said Mr Swan. "This further highlights that the dramatic hit to the budget bottom line is being driven entirely by lower than expected revenues, while the government continues to exercise spending restraint," he said.
Australia is due to go to the polls on September 14 and the ruling centre-left Labour party is trailing in the polls.
Australia is also facing a painful transition away from the key mining sector as the investment peak looms, highlighting soft patches in the economy.
The economy grew 0.6% in the three months to December as exports lifted, but analysts have warned of a subdued picture overall, despite jobs data released on Thursday showing employment growth at a near 13-year high.
Canberra has flagged growth of 3.0% for the fiscal year ending June 30. The Reserve Bank of Australia, which held interest rates at a financial crisis low of 3% this month, puts it at a more moderate 2.5% for the same period.