Even the Opposition reckons the economy will be OK
The MYEFO, the government acronym commonly now being translated as “mini-budget”, could be delivered sooner than later in the year.
The Mid-Year Economic and Fiscal Outlook - essentially a half-way overview of the May Budget’s progress - will be a significant occasion for Treasurer Wayne Swan to inject a bolt of confidence in the strategy he outlined just six months ago.
That strategy has been ripped and torn by falling resources prices and continued economic uncertainty in Europe. The bijou budget surplus of $1.5 billion is at risk because of falling tax revenue. Retailers continue to complain as consumers continue to save; employment growth is slow; the high value of the Australian dollar and the drop in prices for our minerals has meant we have imported more than we exported.
The MYEFO usually is held towards the end of the year, in December, but might be brought forward to late this month or early - really early - in November. No firm decision has been made.
There are precedents for October and November on both sides of politics, but not for current economic circumstances.
Mr Swan will have to combat the widely-held notion that the Australian economy has just two settings - boom, or catastrophe. The switch only goes one way or the other.
And the decline of mineral prices overseas - no mater the high level of mining investment here - has inclined some to argue the switch has moved from boom.
Plain-talking Treasury secretary Martin Parkinson on Friday addressed this perception of limited options and the pessimism it causes.
“The term ‘resources boom’ is simplistic, because the corollary of a boom is a bust,” Dr Parkinson told the John Curtin Institute.
“Yes, the terms of trade are coming off, but they remain, and are likely to remain, high by historical standards. In other words, we’re unlikely to see a bust - what we’re seeing is a longer, more complex story than the boom-and-bust cycle of generations past.
“So I would concur with Reserve Bank Governor, Glenn Stevens, that rumours of the death of the mining sector have been greatly exaggerated.
“Instead of the boom-and-bust cycle, what we will see ultimately is mining becoming a much larger share of a reshaped economy. The mining sector is expected to rise from five per cent of gross value added in the early 2000s, to in the order of 10-12 per cent in the decades to come.”
The Opposition Leader Tony Abbott has in the past few weeks pledged that a Coalition Government would “return to economic growth” and endorsed a “timely warning” from former Future Fund chairman David Murray that without care Australia could have an economic crisis like that of Greece.
Mr Abbott said on Thursday: “With its endless taxes, this Government is putting the economic future of our country at risk.”
However, Australia’s economy has recorded growth for the past 21 years and is a long way from an Athens collapse. And the Opposition itself thinks that despite a fall in government revenue, there will be money available for big ideas.
On July 1 Mr Abbott made a promise to the Liberal federal council which indicated he thought the economy would provide billions for extra spending. He confirmed $4 billion in those pledges last week.
Mr Abbott said in July that that as a “new commitment” a Coalition government, in its first 12 months, would dedicate $1.5 billion to the East-West Link road tunnel in Melbourne, $1.5 billion to the M4 East in Sydney, and $1 billion to the Gateway Motorway upgrade in Brisbane.
This would be new spending and not money taken from other transport works, and Mr Abbott anticipated the projects would quickly get underway, although by estimates from others they could take up to 10 years to be completed.
“Commonwealth funding at this level should enable these projects swiftly to proceed in conjunction with state and private funding,” he said on July 1.
However, it is likely after 24 months of a Coalition victory not a single piece of gravel will have been moved. The $1.5 billion from the Commonwealth would barely start projects worth $5 to $10 billion, money which would first have to be raised from state governments and private partners.
Then there would be planning and other approvals which would take time. Mr Abbott’s talking tunnels here. You don’t simply dig a four-lane hole through a city on a whim.
But an Abbott government would stump up with its share of the bills after 12 months - that is, as an item in the first Abbott Budget.
That’s a show of confidence in the economy.
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