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Treasurer Wayne Swan says there may need to be cuts to government programs in the May budget for the government to keep its promise to deliver a surplus for 2012-13.
But in a speech at the Australian Business Economists breakfast in Sydney this morning, he said there’d be no "slash and burn".
"The reality is that we need to cut and cancel existing programs if we are to meet our targets and we'll need to redirect some spending to where it is needed most," Swan said.
Swan said fiscal discipline was “not for the faint-hearted”.
“Returning to surplus provides more flexibility for the Reserve Bank to respond to any further developments in the global economy. Maintaining our credible fiscal policy also sends a strong message of confidence to investors across the world in uncertain times,” he said.
But Opposition treasury spokesman Joe Hockey was quick to dismiss Swan's comments, saying "tough love" pre-budget warnings sounded like "groundhog day".
Australian Industry Group chief Heather Ridout told ABC Radio the government had a difficult equation.
"The need for a surplus is certainly there – we’re in uncertain times and being a borrower is not a great place for the Commonwealth to be," Ridout says.
"But at the same time we shouldn't do it at any cost."