Mon, Jun 15, 2015 - Page 15 News List

Australia’s growth slows action on deficit: official


Australia’s prolonged stretch of economic growth has numbed households to the risks of budget deficits and debt, complicating efforts to adjust policy, Australian Financial System Inquiry chairman David Murray said.

Australian Prime Minister Tony Abbott has come under fire for appearing to pre-empt the results of a separate review of the taxation system by promising no changes to the treatment of residential property investments and the private-pension system.

“Running policy by ruling things out is a symptom of an economy and a community that has had [about] 25 years of continuous growth,” Murray said yesterday on Sky News.

The public “is not well-connected to arguments about debt and deficits, has not seen the serious sort of problems that can occur if those things go wrong, and the speed with which they can build up,” he added.

Abbott’s government, aiming to shore up voter support, has stepped back from budget repair — even as slowing growth and plunging commodity prices push Australia’s finances further into the red.

“It is hard to make a case to the community that things need adjustment,” Murray said. “[However,] there is absolutely no question that Australia now needs some serious policies around productivity improvement.”

The former Commonwealth Bank of Australia chief executive also urged a timely response to his review of the financial system, saying otherwise markets will try to “guess which way the government might jump.”

Murray’s report calls for Australia’s four largest banks to boost capital buffers to the top quartile of global lenders and to set aside more funds against potential mortgage losses.

Landlords have helped fuel a 40 percent surge in Sydney house prices in the past three years, and the Australian Prudential Regulation Authority urged lenders in December last year to limit investor mortgage growth to 10 percent a year.

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