Written BY: M.mcnamara
On Wednesday, Treasurer Wayne Swan addressed the Queensland Media Club to discuss the budget for 2011-2012, and his tone was less than enthusiastic.
In his address, Swan noted that budget cuts are looming, and that the mining boom that carried Australia through the GFC cannot keep the national economy afloat forever. This is partly because the mining sector has accounted for around 20 per cent of corporate profits over the past decade, but has made up only 10 per cent of corporate tax revenues. The industry demands high capital, which means rapidly growing deductions.
“The fiscal situation is also made harder by some of the continuing effects of the global financial crisis and a high dollar. These factors, on top of a cautious consumer and a subdued recovery in household wealth, are just some of the driving forces behind Australia's patchwork economy,” Swan said. He attributed these factors to lower-than-expected budget revenues.
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Swan added that these factors pose big challenges for the Budget, but the long-term outlook is much brighter. “Mining boom mark II is gathering pace and it will mean extraordinary new levels of income flowing into Australia, building our national wealth and incomes. But it will also test the capacity of our economy and our workforce.
It will benefit different Australians and businesses in different ways. And it will bring with it structural adjustments for our economy equal in magnitude to any we have seen before.”
In short, Swan believes the budget combines short-term weakness, medium-term strength, and boom conditions without the boom revenues.
“We can't and shouldn't buy support for this Budget, like our predecessors did. There won't be rivers of gold like they wasted. So don't expect to see billions and billions in pro-cyclical policy measures that will compound the inflationary pressure of this boom like they compounded the inflationary pressures of the last one,” the Treasurer said.