Australia is on track for a modest budget surplus next financial year, Australian Treasurer Wayne Swan said yesterday ahead of this week’s unveiling of his fifth budget for the mining-powered economy.
Australia, which survived the global financial crisis without dipping into recession, has previously been forecast by the government to deliver an A$1.5 billion (US$1.6 billion) surplus for the 2012-2013 fiscal year beginning on July 1.
An excess would represent one of the fastest budget reversals in Australian history, overcoming a current year deficit predicted to be at least A$37.1 billion.
Photo: Bloomberg
“It will be a modest surplus, the surplus will build over time,” Swan told the Nine Network yesterday, without revealing a precise figure.
The treasurer said delivering a surplus had been made more difficult by revenue writedowns of A$150 billion over the past five years, and the budget was expected to contain significant belt-tightening.
Australia is benefiting from low unemployment and a mining and resources investment boom.
“A budget surplus is the clearest sign we can send of the strength of the Australian economy,” said Australian Prime Minister Julia Gillard, adding returning to surplus was “the right thing to do.”
However, the government admits that while Australia’s economic fundamentals are strong, life is tough for businesses outside the mining sector, particularly industries which are being squeezed by the high Australian dollar.
“We understand this isn’t everybody’s boom,” Gillard said.
On Friday the Reserve Bank of Australia (RBA) slashed its growth forecast for the 12 months to next month from 3.5 percent to 2.75 percent, citing sluggish exports due to global economic turmoil and the robust Australian dollar.
The statement came just three days after it cut its official interest rate by 50 basis points to 3.75 percent — its largest reduction since February 2009 — in a move seen as jump-starting sluggish growth.
Some economists saw delivering a budget surplus as needlessly weakening the economy in the circumstances.
“It is just illogical,” former RBA board member Warwick McKibbin said last week.
DeLoitte Access Economics analyst Chris Richardson said he too would not want to see the government cut too hard given the economy’s fragility.
However, he said if the government’s cost-cutting budget prompted the central bank to cut interest rates further, it could peg back the Australian dollar, improving margins for manufacturing, tourism and education.
Shane Oliver, chief economist at AMP Capital Investors, was in favor of returning to surplus, and estimated it would be about A$1 billion.
“The economic backdrop is not so bad that we need further fiscal stimulus,” he said. “If we can’t get back to surplus when unemployment is around 5.2 percent and commodity prices are high when will we?”
The budget to be released tomorrow comes amid mounting speculation that Gillard, who is performing dismally in opinion polls, will face a challenge to her leadership from within Labor’s ranks.
Swan dismissed the question, saying: “The prime minister is as tough as nails, and she ain’t going anywhere.”
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to