Australia is gearing up for a tough budget on Tuesday, facing the prospect of the largest deficit in the country's history as the economy struggles with its first recession in almost two decades. The end of the China-driven resource boom that spurred Australia to 14 years of virtually uninterrupted growth has created economic woes not experienced for a generation in the so-called "Lucky Country."
Treasurer Wayne Swan has warned that the current situation means the centre-left Labor government must make "tough decisions" on budget night that will not be popular with the electorate. "There will be hard choices, unpopular decisions and no easy options," Swan said last week, blaming the situation on the worst global recession in 75 years. Economists say the government's attempts to soften the impact of the downturn with more than 50 billion dollars (32 billion US) in stimulus spending have also weighed on the bottom line, creating a mountain of debt.
The end result, according to numerous media reports citing unnamed government sources, will be a budget deficit of around 70 billion dollars in 2009-10. Those sources say the budget is likely to remain in deficit for five to six years as the government attempts to recover from a 200 billion dollar slump in revenues caused by the financial crisis. The reports say the economy will contract by 0.5 percent in 2009-10 and unemployment, now 5.4 percent, will soar well above eight percent.
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