Hockey welcomes 'positive signs' on economy
Treasurer Joe Hockey has cautiously welcomed higher than expected growth figures in the latest national accounts, but says 'we need to do better'.PT3M28S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-346pg 620 349 March 5, 2014
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Treasurer Joe Hockey has indicated his first budget will be far less tough than had been believed, saying he will ensure cutbacks bite only slowly.
Arguing he can set out a credible longer-term path to surplus, the Treasurer declared on Wednesday that the May budget can promote a stronger growth projection and add potentially thousands of jobs.
Raising his sights: Treasurer Joe Hockey at Parliament House on Wednesday. Photo: Andrew Meares
"You need trend growth of 3 to 3.25 per cent to start to get unemployment down," he told a Canberra news conference. "That is a core focus of what we're trying to achieve."
The switch to stimulating the labour market follows months of negative job news, with companies from large manufacturers Holden and Toyota to miners and most recently Qantas announcing thousands of redundancies now and in the future. The budget update released late last year forecast two years of relatively weak economic growth of 2.5 per cent. But greeting Bureau of Statistics figures showing growth through the year to December of 2.8 per cent Mr Hockey said his budget would now set its sights significantly higher.
Asked whether growth of that order was a realistic target , Mr Hockey said: "If we can get some reforms through, I think it is."
Reforms needed to "grease the wheels" of growth include abolishing the carbon and mining taxes, re-establishing the Australian Building and Construction Commission, winding back new regulations governing financial planners and refocusing government spending on the productive areas of the economy, especially infrastructure.
The government will introduce bills to abolish what it says are more than 8000 redundant laws and regulations on a special US-style ''repeal day'' set down for March 18.
Asked whether the Coalition was planning to cut the budget harder than expected to bring down the deficit more quickly Mr Hockey said it would do the reverse.
"No, we are not," he said. "We are not going to undermine improving economic growth in the budget. We are not going to do that. We want the economy to grow faster, to give people more jobs. That's what we want."
Mr Hockey said that in the budget the Coalition was "of course going to do everything we can to have a credible path back to surplus so that we can then start paying down the debt".
The distinction between a "credible path back to surplus" and immediate cuts suggests that the Treasurer will announce a number of measures in the budget that will not take effect until economic growth is likely to have improved. Some of the contentious measures might not come into force until after the 2016 election. Mr Hockey has had the recommendations of the National Commission of Audit for three weeks.
The government has begun stripping potentially billions from the spending side of the budget without damaging economic demand.
Mr Hockey and Prime Minister Tony Abbott have stressed that quarantined areas of expenditure such as health, education and defence can be improved with efficiencies. But the government has also now acknowledged that projected spending growth in areas like education will be cut.
Household spending grew a healthy 0.8 per cent in the December quarter, but it was fuelled by a cut in the savings ratio from 10.6 to 9.7 per cent rather than a lift in incomes, suggesting the improvement is fragile.
All but 0.2 points of the 0.8 per cent lift in GDP was the result of stronger exports relative to imports as previous mining investment paid dividends. Profits rose 4.9 per cent in the quarter and 10.3 per cent over the year.
The Treasurer cautioned against expecting too much more tax from the boost in profits, saying mining and other companies had considerable accumulated losses they could use to cut their taxable profits. Although iron ore and coal prices had held up well during the December quarter they had since fallen and were now below the levels forecast in last year's budget.
Investment in housing rose 1 per cent in the quarter. Business investment slid 3.4 per cent.
The December quarter national accounts are the last before the budget, which is due in 10 weeks' time on May 13.