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Australian Prime Minister Julia Gillard on Monday warned voters to brace for an austere election-year budget, unveiling a Aus$12 billion (US$12.4 billion) slump in revenues due to the strong dollar.
Gillard, who is tipped to lose her bid for a third Labor government term in September, said the "unusually low revenue, which wasn't forecast even a few months ago" would require serious belt-tightening.
"The amount of tax revenue the government has collected so far this financial year is already Aus$7.5 billion less than was forecast last October," Gillard said in major pre-budget speech.
"Treasury now estimates that this reduction will increase to around Aus$12 billion by the end of the financial year (to June 30)."
She stressed that the "extraordinary revenues" of the pre-financial crisis mining boom were a thing of the past and the current picture was "in part, a return to normality" as the economy transitions away from the resources sector.
The Reserve Bank of Australia expects mining investment to peak this year.
Gillard blamed the robust Australian dollar, which has traded at or above parity with the greenback since October 2010, for squeezing trade-exposed industries and company tax earnings.
The depressive impact on prices meant nominal gross domestic product -- a measure of the economy incorporating inflation -- was currently running at an annualised rate of 2.0 percent, compared with predictions of 5.0 percent a year ago.
"So revenue growth will be less than natural growth in key areas of expenditure and is spectacularly lower than reasonably predicted," the prime minister said.
"I trust that all would acknowledge the government has some serious decisions to make and announce in the coming two weeks.
Treasurer Wayne Swan is due to deliver the budget on May 14.
He warned earlier this month of a "sledgehammer" to revenues, steeling voters for further spending cuts to follow the Aus$33.6 billion in savings announced last year, primarily from the defence and foreign aid budgets.
Centre-left Labor scraped back into office in 2010 with a minority coalition and are unpopular with voters mistrustful of factional warring that delivered Gillard to power and has seen two challenges to her leadership in as many years.
Their conservative opponents are campaigning ahead of the September 14 polls on issues of trust after Gillard reneged on a pre-election promise not to impose a carbon emissions tax.
She was also forced in December to abandon a long-held vow to bring the budget back to surplus this year after plunging commodity prices caused by a slowdown in China hit government coffers.
Opposition finance spokesman Joe Hockey said the government had been over-ambitious in its forecasts, "estimating a 12 percent increase in revenue year-on-year and then cry(ing) crocodile tears when it pulls to 7.6 percent".
"They've committed to spending against money that we're never going to get," he said.