Australia to Control Spending to Reach Budget Surplus, Swan Says
The government made more than A$130 billion ($137 billion) in savings over the past five budget periods and measures such as reducing private health insurance rebates for high income earners would enable it to reach the goal of a surplus, Treasurer Wayne Swan said yesterday in his weekly economic note.
The Australian government in May revealed a budget that aims to cut spending for the first time in at least 42 years as Prime Minister Julia Gillard seeks to end four years of deficits, a move that would give the central bank flexibility to lower interest rates to boost growth.
“We’ll need to continue to find savings to deliver on our priorities in areas like education and disability reform,” Swan wrote. “Governments need to tighten their own belts as well. That’s why we’ve taken a methodical approach to finding savings across the public service.”
Australia’s economy advanced 3.7 percent from a year earlier last quarter, the strongest annual pace since 2007 after a revised 4.4 percent growth in the first quarter, according to the Bureau of Statistics report on Sept. 5.
Government spending rose 1.6 percent in the second quarter, adding 0.3 percentage point to GDP growth, and household consumption advanced 0.6 percent last quarter, also adding 0.3 point to the expansion, the Sept. 5 report showed.
“Our spending discipline is well demonstrated by the fact that we’ve been able to make room for our priorities and put the budget on track for surplus this year, while also keeping taxes low,” Swan said. Commonwealth taxes are estimated to make up 22.1 percent of GDP this year, down from the record high of 24.2 percent set in the middle of last decade, he said.
The government has no plans to increase the sales tax on goods and services, Gillard told reporters yesterday.
Swan also said the Federal Reserves’ plan to support growth and jobs in the U.S. and a constitutional court’s ruling in Germany backing Europe’s bailout fund to combat the region’s debt crisis should provide “much needed” support to confidence in the near term.
Fed Chairman Ben S. Bernanke said on Sept. 13 that the central bank will buy $40 billion of mortgage-backed securities a month, without a limit on the total or duration. The Fed also extended its near-zero interest rate policy until 2015 and said it will stay accommodative “for a considerable time” even after the economy strengthens.
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