Storming Australian dollar to hit Budget bottom line as Wayne Swan revises forecasts

THE strong dollar is a win for online shoppers but has blown a $400m hole in the Budget.

"The update forecasts strong growth, falling unemployment and a big pipeline of investment that's going to be gathering momentum," said Wayne Swan / File

THE storming dollar will wipe a projected $400 million off the Government's bottom line, but Wayne Swan says the nation is on track to return to surplus in 2012-13.

Higher than expected economic growth and falling unemployment levels have also been forecast in the mid-year economic and fiscal outlook released in Canberra today, The Australian reported.

The outlook is now predicting a Government surplus of $3.1 billion in 2012-13, down from pre-election forecast of $3.5 billion.

Unemployment is now expected to fall to 4.5 per cent by June 2012, while the Australian economy will grow by 3.25 per cent in 2010-11 - up from 3 per cent in its pre-election forecast - and 3.75 per cent in 2011-12.

Wayne Swan has also announced $3.45 billion in spending cuts to offset election spending promises.

The Treasurer said overall tax revenue was down about $10 billion because of the rising dollar.

Australians doing their Christmas shopping online will get cheaper access to goods bought from overseas websites because of the booming dollar.

But the cost of the buying goods from Australia has increased so much that it has hit demand for Australian goods overseas, resulting in lower tax receipts for the Government.

One of the areas hardest hit by the dollar's climb to parity with the greenback is projected receipts from the contentious mining tax (MRRT).

The economic update shows there is a decline in receipts of $3.1 billion over 2012-13 and 2013-14 from the tax.

"In the MRRT revenue as well as company tax more generally this is where we've had the hit from the value of the dollar," the Treasurer said today.

"All of these contracts are signed in US dollars and what that means is that for a given price, our companies are receiving less and are less profitable."

But Mr Swan stressed there was "no change to the revenues of the MRRT that comes from anything else other than the exchange rate effect. No change at all".

He said it was important not to overreact to the level of the Australian dollar on any given day or week of the year.

"(The rising dollar) does have a very significant impact on revenue.

"But I think the most important thing is to not to actually overreact to that."

Mr Swan said the outlook did not deliver large cuts as some had predicted.

Read more about the revised Budget surplus in The Australian.