Australia's Labor bracing for budget Swansong

CANBERRA (AFP) - Treasurer Wayne Swan vowed to keep Australia among the world's top economies and talked up his party's poll hopes on Tuesday as he prepared to unveil a lean budget with little to offer a hostile electorate.

Swan's centre-left Labor party is on track to lose September 14 elections in a landslide to the Tony Abbott-led conservatives according to opinion polls - a prediction given weight on budget eve by independent lawmaker Tony Windsor.

Windsor, instrumental in delivering Labor to power after the 2010 elections were deadlocked, and a key partner in its minority coalition government, said he expected Tuesday evening's budget to be Swan's last.

"That's entirely up to the Australian people," Swan told reporters.

"I've run for parliament on any number of occasions and I'll continue to run, proud of what has been achieved and going to the next election with the expectation we will win."

Despite a looming peak in mining investment that has long insulated Australia from the kinds of economic turbulence seen in most other advanced economies, Swan vowed to keep it among the world's best.

"Tonight's budget is really about the future. It's about keeping our economy strong, keeping our economy up there in lights as one of the strongest developed economies in the global economy," the treasurer said.

"That is the debate we need to have in this country as we go forward to the election. There will be a clear choice and in that choice we will win."

Labor is unpopular with voters and a Aus$17 billion (S$21 billion) plunge in government revenues, principally due to the protracted strength of the Australian dollar, has upset any hope of delivering a last-ditch splurge on voters.

Instead of a long-promised return to surplus, Swan is expected to reveal four more years of deficit beginning with a Aus$15 billion shortfall in 2013-14, along with tax hikes and benefit cuts to fund education and disability reforms.

Foreign aid will go under the scalpel for a second consecutive year in a bid to find savings, with the government to push back by three years a pledge to boost development spending to 0.5 percent of gross national income.

Of note as Australia's mining investment boom peaks this year and the economy begins a painful and uncertain restructuring will be the government's growth, inflation and unemployment forecasts.

The Reserve Bank of Australia dampened its outlook last week, flagging subdued growth of 2.5 percent and inflation of 2.25 percent for calendar 2013 as the nation's decade-long commodities boom moderates.

That followed a shock 25-basis-point cut by the bank, reducing official interest rates to a record low 2.75 percent in a bid to stimulate economic activity depressed by the stubbornly high Aussie dollar.

Canberra's most recent forecasts, published in October, put growth at 3.0 percent for 2013/14 and 2014/15, unemployment at 5.5 percent/5.0 percent and inflation at 2.25 percent/2.5 percent.