Australian Prime Minister Tony Abbott is promising a “measured, responsible and fair” national budget to be released tomorrow, flagging support for families and small businesses after almost losing his job in the backlash over last year’s plans.
While the first budget of his conservative government was focused on repairing the deficit, Abbott emphasized that this year, he is focused on “jobs, growth and opportunity.”
“This will be a budget that is prudent, frugal, responsible,” he said, going as far as to call it “dull.”
“This is a budget that will involve structural change, but they will be much less drastic, they’ll be much less drastic structural changes than the ones that were in last year’s budget,” Abbott said.
After announcing deep cuts to Australian federal welfare and spending last year working to rein in a ballooning deficit, the government was hit hard in the polls.
Abbott’s position was questioned as the public became frustrated with policy missteps. He survived a challenge to his leadership in February and has since taken a more cautious approach.
National Australia Bank chief economist Alan Oster said the budget would be about “doing things that are not very controversial.”
“My expectation would be that you are probably going to get bracket creep essentially being the main factor that gets the budget deficit down as you go forward,” he told reporters.
“Bracket creep” is where wage rises meant to adjust for inflation can bump workers into higher tax brackets.
The Australian government said when releasing last year’s budget that it wanted to reduce its deficit — then A$49.9 billion (US$39.6 billion) — to A$29.8 billion this year.
However, with some of the government’s planned cuts still stuck in the upper house Senate, some economists expect the deficit to remain fairly large.
Investment bank Goldman Sachs forecasts a deficit this fiscal year of A$48 billion, falling slightly to A$43 billion next year.
“That is probably not a bad thing for the economy, because we obviously do not want to see the Reserve Bank try to stimulate things and the government trying to wind it back,” Commonwealth Bank of Australia chief economist Michael Blythe said.
Australia has avoided falling into recession for more than two decades, but an unprecedented mining investment boom is ending and growth in non-resources sectors has yet to fill the gap.
Consumer and business confidence is soft, while the jobless rate has been ticking up over the past year, reaching an 11-year high of 6.3 percent in January. It was at 6.2 percent last month.
GDP expansion has remained below-trend, and the Reserve Bank of Australia has continued to loosen monetary policy, cutting interest rates to a record low of 2 percent last week.
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