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The government has released its first budget following the GFC to mixed reviews
Federal treasurer Wayne Swan says Australia is at the beginning of a resource-driven up-cycle, which will inevitably help push the economy back into surplus.
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In announcing the 2010-11 budget, the federal government made it clear that it is banking on the revitalised mining boom to drive the federal budget back in to black by the end of the 2012 financial year.
The government has proposed a 40 per cent tax on miners that would effectively make this year’s deficit $40.8 billion – $16 billion less than predicted one year ago.
But not everyone is thrilled with the proposed 40 per cent tax on miners – particularly those who will have to foot the bill.
The mining industry claims the proposed ‘super profits’ tax would slow the development of new mines and thereby compromise the budget recovery – a claim Mr Swan fiercely denies.
Mr Swan described the existing system of state-based mining royalties as rickety, and says Australians have long missed out on a fair share of the results of the resources boom.
The mining industry currently accounts for almost 50 per cent of Australia’s exports, and Mr Swan hopes that extracting more money from this lucrative industry sector will address the problems caused by the existence of a two-speed economy.
If the mining tax is passed through Parliament, resource rent tax should grow tenfold, from $1.48 billion this financial year to $15.9 billion by 2013-14.
However, whether the tax receives Parliamentary approval remains to be seen with the opposition condemning the mining tax, and the budget as a whole.
Mr Swan defended his budget, labelling it “conservative”. Moreover, he says the government’s proposed 2 per cent cap on new spending is “responsible”.
Economists have described the spending cap as “tight” and believe it will lower growth forecasts.
Supporting the case for reduced growth forecasts is the recent decrease in labour demand. National vacancies advertised in newspapers and online fell 1.2 per cent in April – the first drop since January.
In line with the diminishing number of job advertisements, data from the ABS showed unemployment increased 6,500 to 628,100.
On the back of this, business confidence fell slightly, with the latest figures from the NAB Confidence Index showing a three point drop to 13 index points.
Business conditions also stumbled, dropping five points to eight index points last month.
But despite the drop in business outcomes and confidence, NAB chief economist Alan Oster says the economy will continue to travel with a good deal of momentum.
