Australia: Government presents FY 2013/14 budget
May 8, 2013
On 14 May, the government announced the budget for the fiscal year 2013/14, which begins on 1 July. In contrast with the plan presented last year, this years' budget postpones the goal of reaching a fiscal surplus by two years until FY 2015/16. The decision represents a response by the government to the changed global economic environment compared to last fiscal year. According to the Treasury, "difficult global conditions and the sustained high dollar are weighing heavily on prices and profits across the board and reducing budget revenues". Against this backdrop, the country is expected to record a 1.1% deficit this year, up from the 1.3% deficit estimated for the fiscal year 2012/13.
With this year's budget plan, the government aims at improving the sustainability of the country's public finances, while at the same time providing a boost to the economy, which is beginning to show signs of weakness following the end of a decade-long boom in mining investment. In order to achieve targeted savings of AUD 43 billion, the government plans to close tax loopholes for multinationals and larger companies. In addition, a cash payment to parents of new-borns will be scrapped and the levy on Medicare - the country's publicly funded universal healthcare system - will be raised.
Meanwhile, measures to support the economy include infrastructural investment in road and rail projects amounting to a total AUD 24.0 billion, in addition to AUD 9.8 billion to support an overhaul of the education system in order to "enhance Australia's future productivity and wellbeing". Finally, further spending increases are planned to improve the country's healthcare system and support the labour market.
According to analysts, the budget represents an attempt by the government to regain popularity, as support for Prime Minister Julia Gillard continues to wane ahead of the presidential elections scheduled for September 2014. In particular, the stress on education and healthcare spending appears to be directed at regaining credibility amid core Labor party voters. Despite the government's efforts, opinion polls taken after the presentation of the budget show a strong support for the right-wing coalition formed by the Liberal party and the Nationals, which maintains a lead of more than 10 points over Gillards' Labor party.
Author: Armando Ciccarelli, Head of Data Solutions