SYDNEY - Australia’s ruling coalition declared on Tuesday (May 8) that the nation’s sagging economy had finally “pulled out” of tough times, releasing a generous Budget that cut taxes and appeared designed to win over voters ahead of a looming election.
Revealing that the national coffers had received a surprising 6.6 per cent boost due to the growing economy and higher resource prices, Treasurer Scott Morrison, said the nation’s fortunes had “turned around”.
Despite insisting he was committed to reducing the nation’s soaring debt, Mr Morrison announced high-spending plans, including A$140 billion (S$140 billion) worth of income tax cuts and setting aside A$75 billion for rail, roads and other infrastructure.
“The economy is now pulling out of one of the toughest periods we have faced in generations,” he told Parliament. “But it is also true that the benefits are yet to reach everyone and this will take more time.”
Australia has enjoyed a world-record 26 years of continuous economic growth, boosted by a China-fuelled mining boom.
But the economy has sagged since the 2008 global financial crisis and as the mining boom faded, although rising resource prices this year have added to company profits and boosted tax revenue.
Economic growth is tipped to strengthen from 2.75 per cent in 2017-2018 to 3 per cent in 2018-2019.
Mr Morrison insisted the government would finally end almost a decade of deficits, predicting a small A$2.2 billion surplus in 2019-2020, a year earlier than planned. The deficit this year is due to be A$18.2 billion.
“We have put constraints on how much we spend and how much we tax, to grow our economy and responsibly repair the budget,” he said.
“It has been a long road back from where we started in 2013 (when the Liberal-National Coalition defeated the Labor opposition party). We are close to our destination.”
The lavish spending includes A$293 million to improve airport security, including extra scanners and cargo screening. About A$500 million will be spent over seven years to try to rescue the ailing Great Barrier Reef.
Analysts said the Budget – which directed short-term tax cuts at lower- and middle-income earners – was filled with pre-election sweeteners but the giveaways remained relatively “restrained”.
Prime Minister Malcolm Turnbull is expected to call an election later this year or early next year but has long trailed in opinion polls and badly needs a popularity boost.
“So begins the election campaign,” said ABC business editor Ian Verrender. “(The) Budget takes full advantage of unexpected turnaround in the government’s revenue fortunes, delivering with it the ammunition to fight an opposition that... has led the way on policy.”
Defence force funding will continue to increase to A$36.4 billion this year and is due to reach a targeted 2 per cent of gross domestic product in two years.
The tax cuts will provide up to A$530 each from July 1 for up to 4.4 million people earning between A$48,000 and A$90,000 a year.
Deloitte Access Economics’ economist Chris Richardson said he was concerned that the nation’s biggest trading partner, China, may experience a slowdown – a consequence that would prove highly damaging.
“The Budget has gotten lucky for the first time in years,” he told ABC News. “Only some of those dollars are being handed back. There is that China risk; you don’t need much to go wrong.”
Labor said it would support the income tax cuts but attacked the Budget as “unfair”. It opposes the coalition’s 10-year plan to cut corporate tax from 30 per cent to 25 per cent.
“Clearly the government has committed billions of dollars on the back of a temporary global economic upswing – we have seen how that plays out before,” said Labor frontbenchers Chris Bowen and Jim Chalmers.
The Budget included a A$500 million, 10-year plan for Australia to become a “world leader” in gene research and A$26 million to set up a national space agency.
Business commentator Ross Gittins said he was concerned that the Budget presented an excessively rosy outlook. He said the government had looked to growth in revenue and employment and concluded that “it’s all looking up”.
“If you believe Malcolm Turnbull’s luck can turn on a sixpence, this is the Budget for you,” he wrote in The Sydney Morning Herald. “This Budget is too good to be true.”