Australian opposition urges reduction in stimulus measures
Updated
The Australian government is under more pressure to review its budget strategy because it's been "too successful". The federal opposition has long argued the stimulus measures announced last year should be reduced quickly to limit the government's debt. It feels vindicated now with the release of Treasury figures showing a lower than expected budget deficit.
Presenter: Karon Snowdon
Speakers: Australian opposition Treasury spokesman, Joe Hockey; Australian Treasurer Wayne Swan; Reserve Bank governor Glenn Stevens, economist Tony Richards
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SNOWDON: The Government's budget shortfall for the last finanical year is $A27 billion or $US23 billion. That's $5 billion better than the budget forecast in May. It's the first deficit in seven years so regardless of the improvement it continues to provide political ammunition for the parliamentary opposition, which has heavily criticised the government's stimulus spending.
The Opposition's Treasury spokesman, Joe Hockey, has found a way of dumping on the good news - saying the lower deficit figure proves the government over-reacted to the financial crisis.
HOCKEY: Kevin Rudd and Wayne Swan claimed that a wrecking ball went through government revenue and that's why they had to accrue so much debt. Yet the figures released today indicate that revenue - tax collections for the Commonwealth Government during the worst of the economic crisis - are down only 1.6 percent.
SNOWDON: The Treasurer, Wayne Swan, says his stimulus spending totalling $US36 billion has helped improve economic conditions and given a modest boost to the government's bottom line. Company tax receipts were higher than expected and social security payments lower. Wayne Swan says the opposition's argument has been demolished.
SWAN: It exposed the dishonesty of their debt and interest rate campaign. But I think most importantly it confirmed for all Australians why the stimulus has been important, in that it kept Australia out of recession.
SNOWDON: That position was endorsed by the Reserve Bank Governor Glenn Stevens in a speech a day earlier.
STEVENS: I am personally am not greatly worried by the debt sustainability angle level here. I think for a country like Australia it should be seen as quite manageable.
SNOWDON: The Treasurer says the government's net debt stands at 1.3 percent of GDP. That's much lower than 59 per cent of GDP reported across the major advanced economies in 2008. Yet Wayne Swan warns the effects of the global recession will be felt in Australia for some time, with ongoing impacts on the budget and further rises in unemployment. Those arguments were used to diffuse calls for stimulus cuts at last week's G20 meeting.
And now a Reserve Bank officer has issued a warning of his own. Economist Tony Richards says Australia has managed to enjoy higher economic growth and less pain than many nations during the global recession. It didn't suffer the massive housing price crashes seen elsewhere. But compared to other countries, housing affordability remains low, that is incomes can't keep up with house price rises.
Demand will continue to outstrip supply as natural population growth, immigration and the slow release of land for development add to the pressure.
RICHARDS:The risk is we might move towards undesirably strong price growth in Australian housing prices. As a nation we are not really any richer when the price of housing rises but the more vulnerable tend to get hurt. In addition the social impacts of declining housing afforability are becoming well understood.
SNOWDON: Tony Richards is the head of economic research at the Reserve Bank. As Australia worries about rising prices, the United States is welcoming them. There are indications from reports yet to be released that values in 20 U.S. metropolitan areas probably declined at a slower pace than previously thought. House sales have risen for four out of the last five months, signaling the worst of the housing crisis could be over in the nation where it has been the most painful.
