Australian economy produces A$10bln budget boost

Australia's government this week will reveal an improvement of up to A$10 billion ($8.67 billion) in the past year's budget, a report said on Monday.

Treasurer Wayne Swan would release the 2008-09 budget outcome by Wednesday, the Australian newspaper said, while a mid-year review of 2009-10 budget numbers would come in November, along with a new report on the long-term budget outlook.

The government, strongly ahead in opinion polls and facing re-election in late 2010, forecast a deficit of A$32 billion in the May budget and saw a record A$57.6bn deficit in 2009-10 as it borrowed to replace a A$210bn collapse in tax receipts.

But a strong economic turnaround and government stimulus spending have helped boost employment, leading treasury department economists to greatly upgrade their forecasts for the next three years, the newspaper said.

The improvement could slash A$75bn from the government's debt and bring the budget back into surplus by 2014-15, a year earlier than expected, the newspaper said, citing market economists.

Reserve Bank Governor Glenn Stevens will be quizzed by lawmakers later on Monday on whether stimulus spending in the face of an economic recovery could force interest rates to rise more quickly from the current official cash rate of 3.0 percent, its lowest level since 1960.

The improved budget outlook has contributed to a fall in long-term interest rates, with the difference between Australian and U.S. 10-year bonds falling from 210 to 185 basis points in the past few weeks, economists said.

($1=1.153 Australian Dollars)