Australia: Government presents FY 2012/13 budget
May 17, 2012
On 8 May, the government announced the budget for the fiscal year 2012/13, which begins on 1 July. The aim of the budget plan is to restore a fiscal surplus, following three years of deficits. According to the budget statement, the country will achieve a surplus of 0.2%, contrasting the 2.8% deficit estimated for the fiscal year 2011/12. The majority of the savings will be achieved through a reduction in expenditures, in particular defence spending and aid to developing countries. Further resources will come from scrapping a planned reduction in the corporate income tax. Part of the savings from expenditure cuts will be channelled towards businesses and households, in the form of a better tax regime for small companies and an increase in family payments. In his budget address to the parliament, Treasurer Wayne Swan stated that a surplus will represent a buffer for the Australian economy against the uncertain global economic environment and that it will provide leeway for the Reserve Bank of Australia (RBA) to reduce interest rates further. In fact, according to analysts, providing the RBA with the flexibility to pursue further monetary easing was one of the main goals of the budget presented by the Gillard administration. Lower interest rates will help easing upward pressure on the Australian dollar, thus improving the outlook for the exporting sector which have been hit hard by the strong currency in recent months.
Author: Armando Ciccarelli, Head of Data Solutions