Australia
underestimated growth, unemployment, and debt figures by billions
Australia
will post a budget deficit of $30.1 billion for the fiscal year, a
gross miscalculation from its May estimate of $18 billion, but the
government promises to stay on track.
2
August, 2013
Federal Treasurer Chris Bowen, speaking on the newly-released economic report, said Australia is undergoing ‘economic transition’ and ‘not a crisis’. Bowen predicts weaker economic growth, increased unemployment, and more government debt on the horizon.
The
forecast 2014-2015 deficit has surged to $24 billion, up from the
previously $10.9 billion. The government has vowed to curb the
deficit for the 2016-2017 period.
The
report shows that Australia’s 2013-2014 deficit will be 1.9 percent
of GDP, much lower than the US deficit of 5.4 percent of the economy,
Japan’s 7 percent, or the euro zone’s 2.6 percent, according to
April IMF data.
Australia
isn’t expected to reach a surplus until 2016-2017, when it is
projected to be $4 billion, also trimmed from its May figure of $6.6
billion. Many government officials are skeptical the budget will
reach a surplus by the 2016-2017 fiscal year.
"It's
blatantly obvious - Labor has lost control of the budget and is
losing control of the economy," Coalition treasury spokesman Joe
Hockey said, pointing his finger at the Labor party for derailing the
economy. Hockey added the budget is in a ‘free fall’.
The
booming mining business has been stunted by low metals prices, and
low commodity prices could be a small factor in the budget shortfall.
Before the metals pricing slump, minerals and natural resources had
propped up the economy amidst surrounding global economic recession.
Prime
Minister Kevin Rudd is seeking election on a widening deficit instead
of austerity measures, which the Aussies view favorably in opinion
polls. He may call for an early election as early as September 7.
Growth
has slowed to 2.5 percent, still above the 1.7 percent US economic
expansion, but much lower than its Pacific counterparts. The May
budget projected a 2.75 percent growth rate.
Australian
Prime Minister Kevin Rudd (AFP Photo)Australian Prime Minister Kevin
Rudd (AFP Photo)
Unemployment
isn’t expected to drop until at least 2015, according to the
updated economic outlook. The jobless is expected to rise from 5.5
percent to 5.75 percent, and is slated to expand to 6.25 percent
before returning below 5 percent in 2015.
The
weakening Aussie dollar is helping boost natural resource exports,
especially in competition with New Zealand, as the Australian dollar
hit a 4.5 year low against the New Zealand dollar late July.
The
Australian government is also exploring the option of levying its
banks in order to collect budget revenue. It would be imposed on
banks, and not account holders, but banks have warned they may pass
on levies to customers.
Debt:
More debt, says bank chief
The
National Australia Bank chief executive agrees Australia needs to
expand its deficit in order to grow.
''Australia
has a debt problem: we don't have enough,'' Cameron Clyne said on
Thursday.
Clyne
believes Australia has a ‘unique window’ as AAA-rated country to
issue more government debt in order to fund domestic infrastructure
and growth.
At
present, Canberra has a $300 billion cap on government and securities
borrowing for 2013, but this limit may need to be raised according to
Clyne.
''If
we continue to have the debate that suggests that all debt is bad,
and not a debate on the productive use of debt, we will simply not be
able to fund the infrastructure this economy needs to thrive into the
future," said Clyne.
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