SUMMARY
This is AI generated summarization, which may have errors. For context, always refer to the full article.
CANBERRA, Australia – The Australian government Tuesday, May 12, unveiled a budget it said would support small businesses and promote jobs growth as it sought to stimulate a flagging economy hit by slumping commodity prices.
The budget shifted away from a focus on reining in a huge deficit after harsh cuts to welfare, education and health sparked a voter backlash last year and triggered a challenge to Prime Minister Tony Abbott’s leadership.
Instead, the government will roll out a Aus$5.5 billion (US$4.4 billion) small business package, mostly tax cuts, to stimulate investment in the sector, as well as a Aus$4.4 billion boost to funding for family-focused policies such as childcare.
“In this budget, whilst we are continuing with a credible path of fiscal consolidation of around half a percent of GDP per year, we are mindful that we continue to deal with some headwinds, but we are coming through the most difficult days,” Treasurer Joe Hockey said.
“The Australian economy is going to grow faster. The deficit is coming down.”
The budget papers showed that forecast tax receipts had been cut by Aus$52 billion over the 4 years to 2017-18, driven by an almost 50% fall in the price of iron ore – Australia’s biggest export – and weak wages growth.
But the treasurer said despite the hit to revenue, the budget deficit was expected to come in at Aus$35.1 billion, or 2.1 percent of GDP, in 2015-16, below analysts’ expectations of more than Aus$40 billion.
The government also continued to forecast a return to surplus by 2019-20.
Australia has struggled to rebalance away from a dependence on mining as an unprecedented resources investment boom helped the economy avoid a recession for more than two decades.
Unemployment has edged up over the past year, peaking at an 11-year high of 6.3% in January. Consumer and business confidence were soft on economic concerns.
The central bank has sought to stimulate growth by cutting interest rates to a new record low of 2.0% at its last meeting.
The government forecast that the jobless rate could rise to 6.5% in 2015-16 before declining to 6.25% the following year.
Economic growth was projected to remain below-trend at 2.75% in the coming financial year before lifting to around trend growth of 3.25% in 2016-17.
Despite the multi-billion dollar spending measures, Capital Economics’ Paul Dales said the stimulatory policies were insufficient to boost growth.
“The treasurer has decided to turn his back on the economy and not provide a helping hand,” he said in a note, adding that when last year’s and this year’s budgets were combined, expenditure was reduced rather than increased.
Cautious approach
The soft economic data, as well as voters’ displeasure with last year’s cutbacks, saw the government take a cautious approach.
Defense was another big winner, with the government committing an additional Aus$9.9 billion over four years compared to last year.
More than Aus$400 million would be allocated over 4 years for Australia’s involvement in combating the Islamic State (ISIS) group in Iraq with an extra Aus$450 million to fight home-grown terrorism and bolster intelligence agencies.
The government sank $100 million into Great Barrier Reef projects ahead of a UNESCO decision in June that could see the site listed as “in danger”.
Some of the spending will be supported by a Aus$980.2 million cut to the foreign aid budget and more than $500 million saved following a successful military-led operation to stop asylum-seekers reaching Australia’s shores by boats.
At the same time, Australia is to go after large multinational firms shifting profits offshore to minimize taxes, although no figures for revenue increases were forecast.
The budget also outlined proposals to force companies selling digital products to impose a goods and services tax, with projected revenues of Aus$350 million over 4 years.
Labor opposition treasury spokesman Chris Bowen said the budget was about saving Abbott’s job rather than growing the economy.
“The fundamental unfairness of last year’s budget disaster remains,” he said. “This is a short sighted attempt to save Tony Abbott’s job.” – Glenda Kwek, AFP / Rappler.com
Add a comment
How does this make you feel?
There are no comments yet. Add your comment to start the conversation.