On April 14, 2011, Prime Minister Julia Gillard said: "You can't run this country if you can't manage its Budget".
Picture: Rob Leeson Source: Sunday Herald Sun
THE Gillard Government has dumped its sacred election promise to deliver a Budget surplus, saying it would have put jobs and the economy at risk to try and keep it.
The broken vow comes after Julia Gillard abandoned the "no carbon tax" pledge and scrapped her opposition to Pacific Island detention centres for asylum seekers.
Announcing the embarrassing backdown, Treasurer Wayne Swan blamed a $3.9 billion "sledgehammer hit" to revenue between July and October caused by weak company profits.
He won praise from economists, business leaders and the Greens, with top Budget watcher Chris Richardson saying it would have been "dumb to chase the surplus and damage the economy".
Credit rating agency Standard & Poor's said it would not change Australia's AAA credit rating.
But Opposition Leader Tony Abbott said the announcement in the shadow of Christmas was another failure by Labor that showed it could not be trusted to manage the economy or tell the truth.
Ms Gillard and Mr Swan had repeatedly said the surplus was a "guarantee" and would be delivered "come hell or high water" because it was vital to taking pressure off the cost of living. Last year the PM said "you can't run this country if you can't manage its Budget".
Mr Swan revealed he had a long discussion with Ms Gillard, who is on holidays, and other ministers before revealing the surplus was now "unlikely".
"I don't think it would be responsible to cut harder or further in 2012-13 to fill a hole in the tax system if that puts job or growth at risk," he said. "If the worst thing that people say is we got the economics right again but fell short on the politics, well I just say, so be it."
Mr Swan, who has already slashed welfare for single parents, made cuts to the baby bonus and curbed the private health insurance rebate to protect the surplus said it was not in line with Labor values to pursue more cuts.
The Treasurer, who has not delivered a surplus in his five Budgets, said the "aftershocks" from the global financial crisis that had wiped $160 billion from revenue over five years were still being felt.
The most recent update of the Budget just two months ago had predicted a $1.1 billion surplus, down from the $1.5 billion announced in the May Budget.
Economists now believe that it could be a deficit of $10 billion.
Mr Swan refused to say what the projected deficit was likely to be, saying Treasury officials would have a look with "a fresh set of eyes in the new year".
He rejected Opposition claims it was due to wasteful spending, saying spending was down by $1.3 billion and every dollar spent since mid-2009 had been matched by a cut.
Mr Swan said the Government was still committed to revealing how it would pay for increased education funding and the rollout of the National Disability Insurance Scheme in next year's Budget.
Mr Abbott said after boasting for three years about the surplus, it was another failure by Labor.
"You just can't trust this Government to manage the economy and you just can't trust this Government to tell the truth," he said. "For three years they've been saying that this surplus was the badge of their economic credibility. Well, they don't have it any more."
Shadow Treasurer Joe Hockey said Labor was trying to cover up its wasteful spending by "taking out the garbage five minutes before Christmas".
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