Japan's earthquake, tsunami to cut Australia's 2010/11 export earnings: treasury

CANBERRA -- Australian Treasurer Wayne Swan on Friday said he is determined to bring the budget back to surplus in 2012/13, despite the latest Treasury advice that revenues will be hit by the disasters in Japan in the near term.

As a result of the earthquake and tsunami in Japan last month, Treasury said Australia's export earnings are likely to be about 2 billion U.S. dollars lower in 2010/11.

"The tragic events in Japan -- together with the impact of floods and Cyclone Yasi at home -- will clearly mean revenues take a substantial hit in the near term," Swan said in a statement released on Friday.

"So we'll be framing the budget in really tough circumstances this year, but we're determined to bring the budget back to surplus as planned."

A Treasury minute said the disaster, which killed up to 18,000 people and caused about 310 billion U.S. dollars in damage on March 11, would mainly affect the Australian economy through reduced iron ore and coal exports and therefore earnings in the short term.

While Japan is Australia's second-largest export market, it is expected that Japanese demand for non-rural bulk commodities will be lower in the short term due to damage to port facilities, damage to coal-fire power stations and disruptions to steel-making, the Treasury minute wrote.

It said this disruption to export volumes is expected to cut about 0.25 of a percentage point from gross domestic product growth for 2010-11, but over the medium term the net impact on growth is expected to be negligible.

Treasury said higher demand associated with reconstruction would likely support iron ore prices over the medium term, and a decrease in nuclear power production might boost demand for coal.

Meanwhile, Prime Minister Julia Gillard also warned next month' s federal budget will be painful, signaled an end to government stimulus spending initiated during the global financial crisis, as the government would make tough decisions to deliver the promised surplus deadline.

"Taking some pain now will ensure households avoid a lot more pain in the future," she told Australia Associated Press in Sydney on Friday.

"We can take these tough decisions now to bring the budget back to surplus, or we can put them off to the never never, which will just make these decisions harder and these cuts more severe when the time comes."

Source: Xinhua News