Prime Minister Kevin Rudd said on Wednesday his government has to rein in spending as fears over Europe’s sovereign debt problems loom as an Australian election issue this year.

The government on Tuesday released an economic plan to return its annual budget to surplus by the 2012-13 fiscal year — three years earlier than was forecast a year ago.

A record surplus forecast in Rudd’s first annual budget announced in early 2008 became a record deficit as the government borrowed billions of dollars to stimulate the economy during the global economic downturn.

Even so, Australia’s debt remains extremely low by the standards of other developed economies. Growth has also been sustained by Chinese and Indian demand for Australian mineral and energy resources.

Rudd told Radio 3AW his government was confident it would return the budget to surplus “in a time when, frankly, most other governments around the world will be swimming in deficit for many, many, many years to come.”

“Despite what’s happening around the world at the moment, it’s time for the government to pull back” on spending, he said.

Rudd, who will seek a second three-year term as prime minister at elections on a date yet to be announced later this year, said the government’s stimulus spending and strategy to repay all government debt by 2018-19 demonstrated its responsible economic management.

But opposition leader Tony Abbott argues that the government borrowed too heavily to keep Australia out of recession and cannot be trusted to pay back the debt.

“Why does the prime minister only become an economic conservative at election time?” Abbott asked Rudd in Parliament.

“Why would anyone believe that after three years of being addicted to binge spending, with an election looming, that the prime minister can now go cold turkey?” Abbott said.

The budget’s chief architect, Treasurer Wayne Swan, said on Tuesday his economic blueprint had been difficult to draft because of uncertainty about how the global economy would be affected by Europe’s debt quagmire.

The European Union on Monday backed a $1 trillion rescue package for the euro as officials readied tougher oversight over the budgets and economies of most member countries in an effort to contain the region’s debt crisis.

Germany, Europe’s richest nation, only reluctantly backed the deal and has demanded that Greece and other countries that use the euro make sharp spending cuts to curb runaway deficits and public debt in return for financial help.

Swan described the global recovery as “patchy,” and said Europe was “in strife.”

“Greece is a really stunning reminder that there are still risks in the global economy,” Swan said.

“But there could be no starker contrast between the troubles in Europe and our own economic story.”

Associated Press