Wayne Swan has warned of deep cuts in a late-year mini budget after admitting the sharp fall in commodity prices will soon hit the Government's bottom line.
Celebrating figures that showed the Australian economy grew for its 21st consecutive year, Mr Swan conceded the economic clouds were darkening.
The Bureau of Statistics reported the economy grew 0.6 per cent in the three months to the end of June for an annual growth rate of 3.7 per cent.
Australia was behind only Norway as the fastest growing developed nation.
It was driven by a continued pick-up in household spending, government spending and exports.
Business inventories detracted from growth while company profits slumped to their lowest level since mid-2008.
WA State final demand grew 2.1 per cent in the quarter to be 15.9 per cent higher over the full year.
The mining and manufacturing sectors detracted from growth while the housing construction area also weighed down the figures.
The figures also showed a sharp pick-up in productivity growth, though the terms of trade fell 0.6 per cent.
Mr Swan said too many commentators were focusing on negative news. No other developed country had enjoyed 21 consecutive years of economic growth.
But the Treasurer said a combination of the stronger Australian dollar, cautious consumers and the fall in commodity prices was hitting company profits.
This would deliver a "hit to the Budget bottom line" but Mr Swan said savings would be made in the upcoming mid-year Budget update.
"It will make our Budget task harder but we are absolutely committed to delivering a Budget surplus in 2012-13," he said.Shadow treasurer Joe Hockey said that the June quarter had been pumped up by government handouts, adding any Budget shortfall would be made up by tax increases.
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