Australian flag Australia aims to be one of the first advanced economies to return its budget to a surplus following the financial crisis, under plans revealed by the country's ruling Labor government on Tuesday. Announcing big cuts in government spending, the treasurer Wayne Swan said the move would provide a "buffer" against global uncertainty and give the Reserve Bank of Australia further room to lower interest rates. The RBA cut rates by 50 basis points to 3.75 per cent last week in an attempt to stimulate its economy which, in spite of the resources boom, has grown at a disappointing rate in recent months. The Labor government intends to reverse its budget deficit within 12 months by slashing spending on defence, overseas aid and by deferring changes that would have allowed workers aged over 50 to contribute more to their pension. The package of budget measures will deliver a slender underlying cash surplus of A$1.5bn (0.1 per cent of gross domestic product) in the financial year to end June 2013, a dramatic turnround on the $44.4bn deficit now expected for 2011-12. Small surpluses are forecast for the following three years. The surplus years are here," Mr Swan said. Australia would join a handful of advanced economies - including Switzerland, Norway, Singapore and South Korea - that have returned their budgets to surplus since the financial crisis. The targets are underpinned by a forecast rise in overall receipts, which the government says will grow by 11.8 per cent to 23.8 per cent of GDP in 2012/13. Economists said the A$45.9bn turnround in the budget bottom line in 2012/13 year was sharp, representing 3.1 per cent of GDP. "The government's goal of a surplus is being assisted by some optimistic growth forecasts, as well as some clever accounting practices [which shift the timing of spending out of the 2012-13 fiscal year]," said Brian Redican, an economist at Macquarie Securities. Mr Swan forecast the economy would grow by 3.25 per cent in the coming financial year, and 3 per cent in the following year, while the unemployment rate would rise marginally to 5.5 per cent. "The key question that remains unaddressed is how the government will act if weaker growth and employment over the next six-nine months makes it clear that the budget is not heading back to surplus," Mr Redican said. In that situation, the government would be forced to decide whether to abandon its surplus goal, or to undertake another round of spending cuts and tax increases in an already weak economy. The government's forecasts come as the strength of the Australian dollar, brought about by the resource boom, has hit growth in several industries, including manufacturing, tourism and retail. Concerns persist about the Chinese appetite for natural resources. The government avoided a confrontation with the mining industry by dropping plans to cut rebates on diesel for mining companies. The industry had warned that increased costs threatened projects such as BHP Billiton's planned $20bn extension of its Olympic Dam mine in South Australia. Jay Weatherill, the premier of South Australia, called the government's decision not to scrap a rebate on diesel as a "major positive." The federal government's budget "clears the way" for BHP's board to decide this year whether to proceed with the proposed $30bn copper-uranium development at Olympic Dam, he added, which could add 8 per cent to the economic output of South Australia. The defence department will take the brunt of the spending cuts, with "efficiencies" and reprogramming delivering savings of almost A$5.4bn by 2015/16. Abandoning a plan to lower the corporate tax rate by 1 percentage point to 29 per cent will save a further A$4.7bn over the same period. In an attempt to bolster Labor's standing in the polls, Mr Swan also announced A$5bn in new payments to households to lower and middle income families, funded by the controversial mineral resource rent tax. Labor trails the conservative opposition Liberal-National coalition by 18 percentage points according to the latest opinion polls, and relies on the support of crossbench MPs and the Green party to pass legislation. Tuesday's budget has been overshadowed by political scandals. The Labor MP Craig Thomson quit the party last month following allegations he had used a union credit card to pay for escorts while he was head of the Health Services Union, and Peter Slipper, speaker of the House of Representatives, has been forced to stand aside to deal with allegations of fraud and sexual harassment.