Australia unveils spartan budget on eve of polls

Australian Treasurer Wayne Swan made a values pitch to voters Tuesday as he unveiled an Aus$43 billion (US$43 billion) austerity drive in a budget without election-year trimmings.

Swan, delivering his final budget before his Labor party seeks a third term on September 14, emphasised big-ticket reforms to education and disability care and argued for "consistency" at the helm as he revealed an Aus$18 billion deficit for 2013/14.

A major fall in revenues also saw growth forecasts slashed for 2013/14 from 3.0 percent to 2.75 percent and unemployment scaled up from 5.5 to 5.75 percent.

A surplus initially due this year is now set for 2016/17 due to economic turbulence, including a fall in commodities prices due to China's slowdown and the rising Australian dollar.

Despite this, ratings agency Standard & Poor's affirmed Australia's AAA rating with a stable outlook, saying "the government continues to demonstrate a commitment to prudent fiscal policy".

Swan rejected suggestions he was taking a gamble by asking Australians to put the national interest before self-interest in an election year, when Labor appears on track for a landslide defeat.

"We haven't approached the budget from the perspective of opinion polls, we've approached it from the perspective of doing what is right for the nation," he told reporters.

He described Labor's spending priorities as "some of the most important reforms our country will undertake in a generation".

"There is something big in this for Australia and there's something big in this for every Australian family," Swan said.

To find Aus$25 billion to fund initiatives in education and disability, Labor launched a Aus$43 billion savings drive over five years, including deferral of Aus$1.9 billion in foreign aid and tax rises worth Aus$11.6 billion.

It also scrapped or delayed a number of family benefits including a popular "baby bonus" incentive payment for having children.

Swan acknowledged there would be "some people who will be unhappy about this decision" but said the government had decided others areas needed the funds.

Shadow treasurer Joe Hockey called the budget "debt, chaos and spin" and said he did not believe the figures on the deficit. "I think the deficit challenge is substantially larger," he said.

The budget papers laid out some stark economic realities regardless of who wins office in September, with the Treasury estimating a Aus$60 billion fall in total tax revenues in the four years to June 30, 2016.

Company profits have now fallen for a record five consecutive quarters, with non-mining firms seeing profit growth of 0.9 percent in 2012, well below the average 14.1 percent per year seen in the decade before the financial crisis.

Nominal GDP -- growth measured in dollar terms -- was 2.0 percent in 2012, significantly lagging headline GDP of 3.1 percent as prices failed to keep pace.

Resources investment is expected to peak at more than eight percent of GDP in 2013/14, after which time it would "begin to detract from growth" as it unwound, the budget papers said.

Swan told parliament Australia's opportunities were great but the transition from its decade-long mining investment boom would "not be seamless".

The central bank cut interest rates to a record low 2.75 percent this month to try to encourage the non-mining economy.

The bank reduced its own outlook last week, predicting "subdued" 2.5 percent growth for calendar 2013 and inflation of 2.25 percent.