Wayne Swan the Australian Treasurer said in his weekly economic note that the Budget would be focusing on spending cuts. He said that the government would be required to cut down on expenses as the current mining boom will place inflationary pressures on the economy.
The note said that while the outlook was positive for the local economy there were upcoming challenges that needed to be faced. Mr Swan mentioned that an unprecedented investment pipeline will stretch the economy's capacity in the years ahead, putting pressure on prices and wages.
Mr Swan traced the economy trouble back to the booming resources sector saying that large investments by mining companies would entitle them to large tax cuts. At the same time foreign exchange rates currently favoured commodity exporters. So the government revenue will not grow as much as they did in the initial boom stage.
Plus there will be demands worth $9 billion in damages caused by the cyclones and floods in the nation. He added that the disaster in Japan will also reduce commodity export revenue by $ 2 billion as well and would weigh on the Budget as well.
With the treasury coffers not gaining from the mining boom there was a difficult time up ahead with Budget decisions being taken to soften the inflationary risks that are being forecast. This would keep the economy ahead of the challenges rather than having to meet with consequences of inaction which may be more severe.