The federal government has released its 2012-13 budget bill, which showed a widely flagged return to a small surplus in the new fiscal year. Key points and reactions.
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KEY POINTS:
2012-13 surplus forecast at $1.5 bln, or 0.1 pct of GDP
2013-14 surplus forecast at $2.0 bln, or 0.1 pct of GDP
2012-13 GDP growth forecast: 3.25 pct vs 2.5-3.5 pct by RBA
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Commentary
Politicians:
Christine Milne, Greens leader
"This budget is good for teeth but bad for brains.
"The Greens have guaranteed that we will guarantee the government supply. So those bills will go through. But I have to say I am very seriously concerned about 3,000 public servants losing their jobs in this budget.
"In terms of other measures that will come through in legislation, the Greens will look at those and particularly look at whether the savings from stopping the big business tax cuts are being delivered in the fairest way."
Joe Hockey, shadow treasurer
"This is a confused budget with no coherent economic strategy to deliver stronger growth and higher productivity.
"It is a 'cook the books' budget – the forecast surplus in 2012-13 is based on fiddled figures and money shuffles. And the Budget provides no buffer against future economic shocks as the economic storm clouds gather in Europe."
Economists:
Michael Blythe, chief economist, Commonwealth Bank:
"It's implying quite a significant fiscal contraction, but that fiscal contraction has been in the budget forecast for quite a number of years now, so it should already have been incorporated into the Reserve Bank of Australia's thinking.
"The green light for further rate cuts will come from the inflation numbers and if inflation runs along the bottom-end of the bank's target range as expected, then that clearly gives them scope to cut rates if needed."
Annette Beacher, head of Asia-Pacific research, TD Securities:
"I don't think there is enough in here to be a market mover. Having said that, it is still a shift to surplus and is ahead of every OECD nation. However most economists, including myself, questioned the rush to achieve it in one year. This could have been spread out in two...(Prime Minister Julia) Gillard and (Treasurer Wayne) Swan are looking to make a statement and kept to their promises."
Industry groups
Jennifer Westacott, Chief executive, Business Council of Australia
"The growth outlook presented in the Budget with growth forecast at 3 to 3¼ per cent over the forward estimates is by no means assured. It is confident households and businesses that will drive this growth through spending and investment.
"The test for the government will be its capacity to implement the measures in the Budget and turn its projected surplus into a reality.
"The Budget is good in parts, but the hard yards lie ahead on the bigger task of marking out a coherent medium-term strategy that will lift our competitiveness and support investment certainty. This includes comprehensive tax reform, cutting red tape, boosting infrastructure and improving our labour market performance."
Peter Anderson, chief executive of Australian Chamber of Commerce and Industry
"Tonight's federal budget is ambitious for Commonwealth finances but lacks vision for the broader economy."
"It is strong in its ambition to repair government finances, limited in its support for the economy and spoilt by its intention to proceed with the carbon tax and failure to deliver the promised company tax cut."
Links
The Australian Treasury's budget Web site is: http://www.budget.gov.au
Market reaction:
The Australian dollar shrugged off the budget with markets more worried about developments in Europe's sovereign debt crisis. It stood at $US1.0134, not far off a four-month trough of $US1.0110 plumbed on Monday. Australia's 10-year bond yield was also little moved, holding near a 60-year low of 3.37 percent set earlier.
Background
Australia's economy is expected to grow at a below-trend pace as a strong local dollar and still wobbly global economy offset a massive investment boom in the resources sector.
The Reserve Bank of Australia expects gross domestic product growth of 3.0 percent in 2012 and sees the economy growing at 2.5-3.5 percent in 2013.
Underlying inflation, excluding the impact of the carbon tax due to be introduced in the new fiscal year, is expected to stay at 2 percent in 2012, the bottom of the RBA's 2-3 percent target range. The central bank expects underlying inflation to remain well within its target band in 2013.
The government and some analysts believe planned spending cuts will give the RBA room to ease monetary policy further if necessary.
Last week, the RBA cut its cash rate by surprisingly large 50 basis points to 3.75 percent, saying inflation is benign and growth is weaker than it had originally expected.
Reuters
