Commonwealth Budget - Swan Diving into the Red Sea

Commonwealth Budget - Swan Diving into the Red Sea

• Budget deficit of A$57.6 billion (4.9% of GDP) in 2009-10; revenues collapsing as expenditure soars

• Government borrowing to blow out to A$301 billion by 2013; bond issuance to balloon

• Government belatedly admits that Australia is in recession; GDP to fall 0.5% in 2009-10

Federal Treasurer Wayne Swan tonight delivered his second Budget, with projections of a record deficit and a huge blow-out in borrowing. The Budget was a schizophrenic affair, with the Treasurer delivering on election promises like lowering taxes and boosting infrastructure spending, while simultaneously asking higher income earners to make sacrifices via tougher means tests on welfare payments. As such, the Budget is profoundly different from those delivered in the recent past, when the river of gold from the commodities boom allowed Treasurers to deliver only good news. The recession in Australia, though, means those days of milk and honey are over. Crucially, the Treasurer’s “cross your fingers” strategy for returning the Budget to surplus relies principally (and optimistically) on a return to strong, above trend economic growth, rather than the “hard decisions” he promised. Having softened voters up for a “horror” Budget, the Treasurer effectively pulled his punches.

Australian Budget 2009 (pdf)

ENDS

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