1 Apr 2011

Expect pain in budget - Gillard

6:45 pm on 1 April 2011

Australian Prime Minister Julia Gillard has warned that next month's budget will be painful as the federal government makes cutbacks in order to return to surplus by 2013.

Unlike most of the world, Australia did not go into recession during the global financial crisis.

The ABC reports Ms Gillard will not say where the axe is going to fall, but says the Government will make tough decisions to deliver the promised surplus deadline, and take pressure off prices and interest rates during the mining boom.

Federal Treasurer Wayne Swan says 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.

Treasury says Australia's export earnings are likely to be about $A2 billion lower in 2010-11 as a result of the earthquake and tsunami on 11 March. Japan is Australia's second-largest export market.

It expects a third of this will be recouped in future quarters as export volumes rebound.

However, coal and iron-ore exports to Japan will be lower in the short term because of damage or destruction to six key ports that handle non-rural bulk commodities.

There was also damage to five coal-power stations, while disruption to steel-making facilities means output will be 10 to 20% lower than pre-earthquake levels.

The budget will be delivered on 10 May.