Australias conservative government delivered budget proposals on Tuesday (12 May) that were light on radical reform but heavy on pledges to return to surplus, playing it safe politically after the disastrous reaction to last years budget.
Prime Minister Tony Abbott and Treasurer Joe Hockey were savaged in 2014 for handing down an unpopular budget that slashed spending on social welfare programs in order to rein in spiralling deficits.
Major changes to the education and healthcare systems in last years budget were knocked back by an unruly upper house senate following a public outcry that saw the governments approval ratings dip to record lows.
This budget instead focused on popular items such as tax breaks for small businesses, increased childcare subsidies and legislation allowing for a crackdown on tax evasion by big multinational companies.
So, today we have taken steps to continue repairing the budget with sensible savings and with a prudent approach to spending. We are redirecting funding to areas, such as small business, child care and infrastructure, which will boost growth and create jobs. At the same time that weve been repairing the budget, we have seen a strengthening of growth in employment, housing construction, retail trade and in exports, Hockey said in an address to parliament.
With parliament deadlocked, selling the plan will be vital for Abbott, who earlier this year narrowly survived a leadership challenge from within his Liberal Party, if he is to resist pressure to call a snap election.
Australias finances have taken a beating as falling prices for iron ore, the countrys single biggest export earner, have eaten into company profits and wages.
Some A$52bn (£26.4bn, $41.6bn) in tax receipts were lost over the four years to 2017/18 according to the budget, with A$20bn of that coming from the plunge in iron ore prices.
Despite the iron ore price having halved we are still on a clear and credible path back to surplus and gross debt in a decade will be over one hundred and ten billion dollars lower than that which we inherited, Hockey said.
Some analysts had questioned whether Australias coveted triple-A credit rating from all three major agencies might come under pressure without a credible path back to surplus, speculation Hockey slapped down in an interview with Reuters earlier this month.
Ratings agencies Moodys and Standard and Poors said that the budget was unlikely to effect Australias credit rating.
The government is hoping that new free trade agreements with China, Japan and South Korea, together with a weaker Australian dollar and improvement in the terms of trade as major gas projects come on stream, will help offset those losses.
Record low interest rates, together with falling prices for petrol and electricity, are helping drive an uptick in household spending and investment in the countrys red hot property and construction markets, it said.
The government insisted in the budget that it would be able to ride out the bumpy transition from a resource dominated economy to a more diverse one focused on services without raising significant new revenues or slashing spending outlays.
Madam Speaker, this budget is responsible, measured and fair. We are creating opportunities for job seekers, young and old. We are caring for our most vulnerable and we are keeping the country safe and secure. This is a budget for small business people who want to innovate and grow. This is a budget for young people wanting to get a foot in the door. This is a budget for parents juggling the complexities of modern life. This is a budget as much for the miners of the Pilbara as it is for the farmers in the Mallee. It is as for a family in Brisbane as it is for a start-up business in Adelaide. This is a budget that helps build a stronger, safer and more prosperous Australia. Madam Speaker, I truly believe in my heart that our nations best days are ahead of us. So now is the time for all Australians to get out there and have a go, Hockey said.
Having outperformed most of its developed nation peers since the global financial crisis, Australia is expected to grow a modest 2.5 percent this year and 2.75 percent next year, rising to 3.5 percent by 2017/18.
Australias net debt is forecast to rise to 18 percent of GDP by 2016/17, already low by international standards, before falling to just 7.1 percent of GDP by 2025/26.
The deficit is set to narrow from 2.6 percent of GDP in 2014/15 down to 0.4 percent of GDP by 2018/19, placing it on track for a return to surplus before the end of the decade.
