Australia has announced a giveaway budget aimed at easing cost-of-living pressures while investing in defence and infrastructure projects ahead of a general election in May.
Josh Frydenberg, Australia’s treasurer, detailed a series of measures including a temporary cut to fuel excise, A$38bn (US$28bn) of regional and rural investment, A$17.9bn of road and rail projects — many in marginal seats — and a A$9.9bn investment in bolstering the country’s cyber-security capability as part of “a new chapter in Australia’s economic story”.
Tuesday’s budget was delivered with Prime Minister Scott Morrison’s coalition government trailing the opposition Labor party, led by Anthony Albanese, in the polls.
But Frydenberg denied he had unveiled a “spendathon” budget, which included measures to ease the cost of living in the form of a petrol tax cut as well as a one-off $250 payment to 6mn low-income Australians, ahead of the election.
He said the government was instead “banking the dividend of a strong economy”.
The Australian economy has been bolstered by the sharp rise in the price of iron ore, coal, gold and nickel in the wake of Russia’s invasion of Ukraine. The budget included a forecast of a big drop in the price of iron ore and coal by the end of September, but stated that if prices remained at current levels then tax receipts would increase by A$29.5bn.
The Ukraine invasion has also strengthened Morrison’s campaign to increase military spending amid rising regional tensions. The budget included a push to establish a cyber security centre dubbed “Redspice”, which will employ 1,900 data scientists and software engineers.
The government said Redspice would support other military initiatives, such as the Aukus nuclear submarine agreement with the US and UK, and a A$38bn investment in expanding the size of Australia’s armed forces.
“The lesson of history is that weakness invites aggression. It leaves nations vulnerable to coercion. This is the reality we must confront. The world is less stable. We must invest more in the defence of our nation,” said Frydenberg.
The treasury has tried to strike a balance between boosting public spending ahead of the election without triggering a further increase in inflation. Australia’s net debt is forecast to rise to A$865bn by 2026 from A$592bn in 2021.
Frydenberg said the ratio of debt to gross domestic product remained well below other advanced economies, including Japan and the US.
Australia is expected to record a deficit of $78bn in the next financial year, or 3.4 per cent of GDP, which the treasurer said would fall to 1.6 per cent within three years.
Other measures in the budget included more funding to protect the Great Barrier Reef, money to restore koala habitats after the 2020 bushfires and support for small-scale renewable energy projects. Frydenberg said a low-emissions future was critical to building a strong economy, in a rare reference to climate change by his government.
“Australia is on the pathway to net zero emissions by 2050 and [is] playing its part in responding to the critical global challenge of climate change,” he said. “Technology, not taxes, will get us there.”
Source: Economy - ft.com
