Australia's budget situation is likely to worsen further as revenue takes a A$7.5 billion-hit from strong currency and lower terms of trade, Treasurer Wayne Swan said in an interview on Sunday.
"We've been hit in Australia with a high dollar, lower terms of trade, which has had a dramatic impact upon the profitability of companies and prices more generally in the economy," Swan told Australian Broadcasting Corporations' Insiders' program.
That's caused a hit, "a sledgehammer to revenues in the budget since the mid-year update of something like $7.5 billion," he said. "And of course the impact won't just be in this financial year, it will also be across the forward estimates."
The government, at the end of last year, backtracked on its pledge to attain a budget surplus in 2012-13 as high Australian dollar started to affect revenues.
Swan said, however, that the government is trying to protect jobs and make smart investment for future while bringing down the deficit gradually. The alternative to that would be "savage cuts" across the budget to return to surplus earlier, as recommended by Federal Opposition Leader Tony Abbott.
According to Swan, "that would be a tragic mistake for Australia." Sharp budget cuts would not support jobs and growth and it would lead to higher unemployment, he added.
According to Treasury estimates, the deficit for the first eight months of this fiscal year amounted to A$23.6 billion, which was A$5.7 billion wider than previously expected.
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