Australia to control spending in order to return to surplus

Melbourne: Australia will focus spending on vital services such as education while cutting expenditure in order to return the budget to surplus this year, Treasurer Wayne Swan said.

The government made more than A$130 billion (Dh503.40 billion)in savings over the past five budget periods and measures such as reducing private health insurance rebates for high income earners would enable it to reach the goal of a surplus, Treasurer Wayne Swan said today in his weekly economic note.

The Australian government in May revealed a budget that aims to cut spending for the first time in at least 42 years as Prime Minister Julia Gillard seeks to end four years of budget deficits, a move that would give the central bank flexibility to lower interest rates to boost growth.

“We’ll need to continue to find savings to deliver on our priorities in areas like education and disability reform,” Swan wrote. “But of course governments need to tighten their own belts as well. That’s why we’ve taken a methodical approach to finding savings across the public service.”

Australia’s economy advanced 3.7 per cent from a year earlier last quarter, the strongest annual pace since 2007 after a revised 4.4 per cent growth in the first quarter, according to the Bureau of Statistics report on September 5.

Reserve Bank of Australia Governor Glenn Stevens cut rates in May and June to buttress consumption as an elevated currency extended a slump in manufacturing and services.

“Our spending discipline is well demonstrated by the fact that we’ve been able to make room for our priorities and put the budget on track for surplus this year, while also keeping taxes low,” Swan said. Commonwealth taxes are estimated to make up 22.1 per cent of GDP this year, down from the record high of 24.2 per cent set in the middle of last decade, he said.

Swan also said the Federal Reserves’ plan to support growth and jobs in the US and a constitutional court’s ruling in Germany backing Europe’s bailout fund to combat the region’s debt crisis should provide “much needed” support to confidence in the near term.

Fed Chairman Ben S. Bernanke said on September 13 that the central bank will buy $40 billion of mortgage-backed securities a month, without a limit on the total or duration. The Fed also extended its near-zero interest rate policy until 2015 and said it will stay accommodative “for a considerable time” even after the economy strengthens.