Surplus shows economic strength to world

TREASURER Wayne Swan says the government's pursuit of a budget surplus is to project the strength of the Australian economy to the rest of the world.

Mr Swan dodged questions on whether the government would continue its path to a budget surplus at all costs, with a troubled global economy in the background.

"We have put in place some pretty tough savings measures in this update to bring the budget back to surplus," Mr Swan told ABC TV on Monday.

The government released its mid-year budget update earlier in the day, when Mr Swan announced an extra $16.4 billion of budget savings over the next four years to keep to its promised surpluses largely intact.

Mr Swan's mid-year budget review predicts a $1.1 billion surplus in 2012/13, down from the $1.5 billion surplus forecast in the May budget.

It would be a turnaround from a $43.7 billion deficit for 2011/12.

The economic growth forecast for this financial year in the mid-year update was also lowered to three per cent, from the 3.25 per cent trend pace previously.

Mr Swan said the government was sending a message to the world about the strength of the Australian economy at a time of global uncertainty.

"We are going to grow faster than every other major advanced economy this year and next," he said.

"In fact, they would be asking questions as to why we are not coming back to surplus in those conditions."

The savings include a cut in the baby bonus from $5000 to $3000 for second and subsequent children from mid-2013, further changes to the private health insurance rebate and increased visa application charges.

"We have been very careful to ensure that when we are making savings. We are not making impact on growth and jobs," Mr Swan said.

But shadow treasurer Joe Hockey said the federal election, due to be held by late 2013, had framed the budget outlook.

"If it were not for a fiddle on company tax, then the government would be forecasting a budget deficit next year," Mr Hockey told ABC TV.

"Instead, in an election year they are going to have a surplus, and Australian companies and shareholders and Australian employees are going to pay a heavy price for that."

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