Australia to Review Budget Spending Commitments, Swan Says

By Angela Macdonald-Smith

Oct. 12 (Bloomberg) -- Australia's government will review budget spending commitments because of the financial crisis, which will cut economic growth, Treasurer Wayne Swan said.

``We will put everything on the table because our bottom line is responsible economic management,'' Swan told Australian Broadcasting Corp.'s Insiders program today from Washington. He said he doesn't expect the government to backtrack on any ``important'' election commitments.

Australia's economy has ``stood up well'' to global financial turmoil, the Paris-based Organization for Economic Cooperation and Development said Oct. 10 in an annual survey. The report was prepared before a deepening worldwide credit freeze prompted the central bank to unexpectedly cut the benchmark lending rate last week by 1 percentage point to 6 percent, the biggest reduction since a recession in 1992.

``Any prudent government will look at our current situation, assess what we do next given the global shock, and then announce those decisions in good time,'' Swan said. ``There's no doubt that these recent events will have an impact on Australian growth. It's too early to tell by how much.''

Budget Surplus

Swan on May 13 forecast a record budget surplus of A$21.7 billion ($14 billion) for the year ending June 30, 2009, and announced A$33 billion of savings to limit the annual increase in total government spending to 1.1 percent, the smallest gain in nine years. Australia's budget surplus may be reduced by A$10 billion next year because of the turmoil on financial markets, the Australian newspaper reported Oct. 2, without saying where it got the information.

Unemployment is likely to increase more than forecast in the last budget, though it's too early to say by how much, Swan said today. The Reserve Bank of Australia has ``significant room to move'' on monetary policy, while the government has the scope to ``provide some stimulus to the economy,'' he said.

Swan declined to comment on whether the financial crisis may prompt the government to consider delaying a plan to introduce emissions trading, currently scheduled to start July 1, 2010.

Opposition Leader Malcolm Turnbull has suggested putting back the introduction of the carbon trading plan for 12 months.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net