News that the Federal Government collected $2.1 billion in revenue in February suggests that higher interest rates and the credit squeeze have done little to slow the flow of money into Treasury coffers.
Converted into a 12 month figure, that would leave Treasurer Wayne Swan with a budget surplus of $17.6 billion. Some commentators now believe the surplus could top last year’s $18.5 billion record by budget time.
All this means Swan is under pressure to deliver a bold budget. Perhaps inflation means further tax cuts or business grants programs are out of the question, but that doesn’t mean Swan has no option but to squirrel the surplus away in the Future Fund or some other savings mechanism.
For example, a healthy federal budget surplus could present the opportunity to invest in the hard and soft infrastructure the nation desperately needs, or to take action on the “root and branch” tax reform Prime Minister Kevin Rudd has spoken in favour of. State imposts such as payroll tax and stamp duty impose red tape on businesses and prevent them hiring. But a strong Federal Government lead, backed by reform-linked dollars, could be just what’s needed to achieve real change.
Turning to the markets today, at 11.50pm the S&P/ASX200 is down 0.2% on yesterday’s close to 5590.7, with selling in financial stocks the primary reason for the decline.
The mood has been helped by some unusually frank comments on the US outlook from entrepreneur Warren Buffett, one the world’s richest men.
“My general feeling is that the recession will be longer and deeper than most people think,” Buffett told CNN in the US. “This will not be short and shallow.”
That view is supported by new figures showing that a record 18.6 million homes were vacant in the US in the March 2008 quarter, 5.7% up on a year ago.
The number of homes vacant and for sale in the US is now the highest it has been since the US Census Bureau started collecting the data in 1956.
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