Under attack for not doing enough
to take pressure off interest rates,
Treasurer Wayne Swan claimed yesterday
that inflicting more pain in
the budget would have stopped the
economy in its tracks.
''You shouldn't confuse tough
with stupid,'' Mr Swan told the
annual post-budget Press Club
lunch in Canberra.
''If we took some of the advice we
are being given to cut spending and
to rein-in demand we could slam
the economy into a wall,'' he said.
''We've got very uncertain international
environments, slowing
growth, and we've got higher domestic
inflation. Each of those things
mean that we have to strike a
balance, and the balance that we
have struck is we believe the right
one for the long-term health of the
country.''
But private sector economists
disagreed. Most who were
contacted yesterday said they
believed the budget cuts were too
mild to take pressure off interest
rates.
The ANZ Bank's chief economist
Saul Eslake said, ''The budget won't
add to upward pressure, but nor can
it really be said that it exerts
maximum downwards pressure.''
Chief equities economist at Commonwealth
Securities, Craig James,
said,''Interest rate hikes remain an
open question ... Over this year and
next, decisions made by the Government
in the budget will actually be
stimulating, not constraining the
economy.''
Chris Richardson of Access
Economics said that if the Treasurer
wanted to notably reduce the
ongoing inflation risk he should
have cut another $3 billion out of
spending in the coming financial
year. ''That is not an easy thing to
do, cutting spending does involve
pain,'' he conceded. ''But it is pain
that is going to be felt anyway, either
in mortgage rates or in the decisions
of this Government.''
Opposition Leader Brendan Nelson
and treasury spokesman Malcolm
Turnbull hammered the Government
over extra taxes on cars
and alcohol, and predictions that
134,000 people will become unemployed
over the next financial year.
They also criticised the decision
to means test the baby bonus,
saying it was designed to make a
political ''us and them'' point.
''If your household earns in the
six months after your baby [is born]
one dollar more than $75,000 then
you don't get any part, not even a
fraction, of the baby bonus,''
MrTurnbull said.
''I don't think people in those
circumstances regard themselves as
multimillionaires or 'the rich' but
that's where they've set it and it will
save very little money in the scheme
of the budget ... It's Labor playing
wedge politics, the politics of envy,
and that's the political decision, not
an economic one.''
Mr Rudd said he made no apology
for the means testing, saying a
couple earning $150,000 was ''probably
at the point at which it ceases
to be responsible for government to
continue to pay''.
''We say you've gotta draw the
line somewhere,'' Mr Rudd said.
''We think this is the right line and
we'll be indexing it into the future.''
Mr Swan said the Liberal Party
had lost its way on the economy and
had become the party of welfare for
millionaires.