By James Grubel
CANBERRA (Reuters) - Australian Prime Minister Kevin Rudd said Tuesday's national budget won't be a "spendathon," but will show his government as economically responsible to voters, who have been deserting him ahead of polls expected by year's end.
The "no-frills" budget is expected to deliver a surplus up to two years earlier than forecast, in 2013-14, on the back of China's demand for Australian commodities, economists say.
The expected rebound to surplus would be partly funded by a A$12 billion (7.3 billion pounds) from a controversial proposed tax on mining profits and a 24 percent increase in the tobacco tax, The Age newspaper said, without naming sources.
"This budget will not be a pre-election...spendathon," Rudd told parliament ahead of the budget's release on Tuesday.
"This budget will be a no-frills, financially, fiscally responsible (budget) to demonstrate responsible economic leadership," he said.
Rudd is still expected to win the election, but his approval rating has fallen to a record low months from the ballot box, with voters disillusioned over his inability to deliver on policies to tackle climate change, boatpeople, and education, health and telecommunications reforms.
The planned mining tax, announced last week, is clouding the outlook for jobs and investment in the resource sector and Rudd is under attack from miners such as BHP Billiton Ltd.
In its mid-year review last November, the government forecast a deficit of A$57.7 billion in 2009/10, or 4.7 percent of GDP, and A$46.6 billion in 2010/11 or 3.6 percent of GDP, with a return to surplus in 2015/16.
A Reuters poll of economists found a median forecast for a deficit of A$48.5 billion in 2009/10, and A$34.7 billion in 2010/11, with a return to surplus by 2013/14.
Australia avoided recession during the global financial crisis due to a government stimulus package and China's appetite for its mineral resources.
"What we have to do is dedicate this budget to getting back to surplus as quickly as possible. That's the theme of the budget tonight, putting in place the long-term reforms so that as Australia goes forward, we all prosper," Treasurer Wayne Swan told reporters at parliament.
"It will be light on politics and very heavy on responsibility," Swan told reporters.
But the budget will include around A$4 billion of tax cuts to start from July 1, which were outlined in Swan's first budget in 2008/09.
MINING TAX
Several global mining giants scaled back or warned about their Australian investment plans on Monday as the backlash against the government's 40 percent "super profits" tax intensified.
Xstrata PLC suspended copper exploration in Australia, coal giant Peabody Energy cut its offer price for Macarthur Coal and BHP Billiton warned that approving key expansion projects would be difficult.
The Australian newspaper said Rudd was considering changes to the way the mining tax is imposed, under pressure from state governments worried about the tax's impact on projects and jobs.
Swan said the government would consult over the tax.
"We said we would enter discussions with the mining industry in good faith and that is what we are doing right now. We made it clear that we would look at transitional provisions for existing projects," he said.
Swan has said the budget will include a 2 percent cap on new spending, with extra spending to be offset by savings.
The government's mid-year review forecast net debt to peak at around A$270 billion by 2014/15, but economists now see debt peaking at A$240 billion.
(Writing by Michael Perry, additional reporting by Rob Taylor in CANBERRA and Sonali Paul in MELBOURNE)
