Australia’s economy is “growing solidly” and capital expenditure by businesses is forecast to rise 32 percent to a record A$158 billion (US$161 billion) this financial year, Australian Treasurer Wayne Swan said yesterday.
“That spending, although a drag on productivity now, will increase our economy’s capacity down the track,” Swan said in his weekly economic note.
His office yesterday released an interim report on the tax treatment of losses for public comment in a move he said could “encourage investment in businesses that are struggling or that are just starting up.”
Australia, which was the only economy in the G10 to avoid a recession during the global credit crisis, expanded 1 percent in the third quarter, faster than earlier estimated.
Still, the country’s central bank cut its benchmark interest rate on Tuesday for a second straight month, citing Europe’s “much more difficult” financing conditions.
The cut marked the Reserve Bank of Australia’s first consecutive easing since the depths of the world financial crisis in 2009 and reflected a worsening global outlook that is weighing on Australia’s exports.
“There’s no doubt the global instability is hitting our economy and our budget,” Swan said.
“European leaders made progress during the week on addressing the sovereign debt crisis, but clearly the world now wants to see the talk turned into action,” he said.
“The global community and international financial markets need to see the full details and swift implementation of Europe’s plans,” Swan added.
Swan said that the government intended to boost productivity in Australia, which has declined following “a decade of neglect of investment in critical infrastructure and skills.”