Thursday 02 / May / 2024
Sydney: Australian Treasurer Scott Morrison said he’s still “very concerned” about the impact of record-low wage growth on the budget even after the economy rebounded strongly in the final three months of last year.
The treasurer sought to play down the fiscal boost from 1.1 percent growth in the fourth quarter, telling Sky News only that “it’s consistent with where we were at” when the mid-year budget update was released in December.
“Often what you pick up on the swing you lose on the roundabout,” Morrison said. “We remain very concerned about wages growth. I mean that has frankly a much bigger impact on revenues and collections and we continue to watch what’s happening on company profits, too, on the collections there.”
The global reflation story playing out in much of the developed world -- reflected in major central banks having no plans for further monetary policy easing -- is largely bypassing Australia, where wages are stagnating and inflation is weak. Still, the country is benefiting from higher iron ore and coal prices that helped drive a record trade surplus in December and a surge in mining company profits.
The head of Morrison’s Treasury department warned Thursday that any revenue windfall from stronger commodity prices should be used to narrow the budget deficit and not to finance additional spending, as was done by the government last decade. Morrison concurred.
Conservative position
“We’ve taken a conservative position” on commodity price forecasts, the treasurer said. “If there’s an improvement in commodity prices, then that goes toward budget repair. It’s not there to fund a whole bunch of wish-lists on spending, it’s there to get the budget under control.”
Separately, Prime Minister Malcolm Turnbull threw his full weight behind an industrial tribunal’s finding last month to lower some Sunday penalty pay rates, saying it will encourage firms to hire more staff and more businesses to open on weekends.
“We support the decision, we accept the decision, we recognize it was a careful decision and we respect it as the decision of the independent umpire,” Turnbull told reporters in Barcaldine, western Queensland, on Sunday, Australian Associated Press reported.
Australia’s central bank has cut its overnight cash rate to a record-low 1.5 percent to help ease the economy’s transition from mining driven growth back to its traditional services base. Low mortgage rates have sent property prices soaring in Sydney and Melbourne and Morrison flagged that a “housing affordability package” would form part of the May budget.
“We’ve made it really clear that the primary issue that is at play here are the supply side issues,” he said, signaling tax breaks for property investment were unlikely to be closed.
The government in its mid-year budget update forecast an underlying cash deficit of A$36.5 billion ($27.7 billion) in the year through June 30, compared with a A$37.1 billion shortfall predicted in May. It reiterated a projected surplus in 2021 as Morrison struggles to stave off a downgrade to Australia’s AAA rating.
Critical task
“Getting the budget back into balance, that remains a critical task,” Morrison said. “The growth story must remain the focus of the budget because it is growth that not only improves the budget, it’s growth that’s going to lift wages, it’s growth that’s going to lift business expansion, it’s growth that will continue to drive the improvement in living standards.”
Since the ruling Liberal-National coalition’s first budget in 2014, the government has struggled to pass spending cuts through the Senate, where it needs to negotiate the support of minority parties and independents. Morrison said A$13.2 billion dollars worth of measures still need to be passed.
He’s also trying to cut corporate tax to try to keep Australia competitive, including with the U.S., where President Donald Trump is flagging a substantial reduction in the corporate rate. Australia’s populist One Nation party has three Senate votes and its leader Pauline Hanson told ABC television Sunday support for the cut is “not guaranteed.”
Turnbull told reporters the government would continue to negotiate with senators on the tax cut despite Hanson’s comments. He said there had been many predictions in the past that the government wouldn’t get its legislation passed. “We did,” Turnbull said, according to AAP.
