• Bloomberg


Prime Minister Julia Gillard said a 50 percent rise in the value of the Australian dollar is squeezing trade-exposed businesses and cutting tax revenue, forcing her government to make “grave” budget decisions.

The erosion of tax receipts played a part in the government’s decision to raise health care taxation by 0.5 percentage point to fund a national disability insurance program, Gillard said in an interview with Australian Broadcasting Corp. television Sunday.

Gillard’s ruling Labor Party, trailing in polls ahead of a Sept. 14 election, faces a 12 billion Australian dollar ($12.3 billion) slump in tax receipts that forced her in December to abandon a commitment to return the budget to surplus. Australia’s first female leader is also pledging to increase funding for schools as the government prepares the next year’s spending plan, to be released on May 14.

“There are plenty of pressures on because our currency has appreciated,” she said. “That is a really tough pressure. It is meaning for businesses that they are less profitable; that is meaning that there is less tax money coming into the government than was expected. That means you do face grave decisions as you address budget questions.”

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