Australia cuts growth, revenue forecasts ahead of election

Australia cuts growth, revenue forecasts ahead of election
Business & Markets 2013
Written by Reuters
Friday, 02 August 2013 11:17

CANBERRA (Aug 2): Australia's government cut its economic growth and revenue forecasts in a pre-election budget update on Friday, and confirmed a new levy on bank deposits to help it achieve a promised budget surplus by the 2016-17 fiscal year.

Treasurer Chris Bowen said Australia's economic growth would slow to 2.5 percent in the current financial year to June 30, 2014, down from the May budget forecast of 2.75 percent GDP growth.

The budget deficit for the current fiscal year was revised to $A30.1 billion from a forecast in May of $18 billion.

Bowen said since the May budget, revenue forecasts have dropped by A$33 billion over the next four years, forcing the government to look for new savings and tax measures.

The new levy on bank deposits will start in January 2016. It is forecast to raise A$733 million by July 2017, with the final rate to be negotiated with banks.

The budget update comes as Australia's economy makes the transition from the peak of a China-fuelled mining investment boom, and ahead of imminent national elections.

The revised figures support economists' expectations that the central bank will cut rates to a record low of 2.5 percent at its monthly policy meeting on Aug. 6.

On Thursday, the government announced a hike in cigarette taxes which will raise A$5.3 billion ($4.7 billion) over four years.

Prime Minister Kevin Rudd, who returned to office when he ousted former prime minister Julia Gillard on June 26, has revived the ruling Labor Party's poll support ahead of the elections, although the conservative opposition parties remain favourites to win power.

Rudd could call the elections at any time, with speculation he could call the election for Sept. 7 or Sept. 21. - Reuters