Stimulus spending should be continued, as the next year will be critical to the health of the Australian economy, treasurer Wayne Swan has said.
The comments come after the Federal Government released its mid-year forecast yesterday, expecting 1.5% GDP growth for 2009-10 following an earlier prediction of 0.5% retraction.
“We’ve taken the hard decisions and, of course, in this budget we’ve offset all new spending, but the stimulus is still very, very important,” Swan told ABC Radio.
“The economy is still operating substantially below capacity and because of that we decided it was appropriate to continue with our stimulus, albeit withdrawn, as we go through next year,” he said.
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“It was our judgment that we’ve struck the right balance by maintaining our stimulus which of course is gradually withdrawn as we go through next year.”
Meanwhile, finance minister Lindsay Tanner has told ABC’s Lateline Business that challenges still remain for the economy despite the optimistic outlook.
“It’s certainly good news that we’ve got much more positive projections than we had five or six months ago with the budget, but we’ve got a lot of hard yards in front of us,” he said.
“The main thing that’s improving the shape of the deficits over the next few years is better-than-expected tax revenues – but there is typically a lag involved there, so that the tax that’s accrued in this financial year in many cases won’t be paid until the next financial year – so if you look at the four years, you’ll see that the projected deficits are in fact quite a lot smaller over the following three years.”
Shares open higher after good US results
The Australian sharemarket has opened slightly higher today after a shocking day yesterday, due to a more positive result from the US on Wall Street.
The benchmark S&P/ASX200 index was up 11 points or 0.24% to 4551.4 at 12.00 AEST. The Australian dollar also gained ground to US90c.
NAB shares fell 0.1% to $28.87, with Commonwealth Bank shares rising 0.7% to $51.27. ANZ also gained 0.7% to $22.75, while Westpac rose 0.4% to $25.7.
Federal housing minister Tanya Plibersek has told The Australian that local councils and governments are pricing out first-home buyers by over-taxing the property industry.
“We are not building enough houses every single year, and part of the problem is the very high cost of a serviced block,” she said.
Seven Media Group records $1.9 billion loss
Seven Media Group has now cut more than $1.5 billion from the value of its television network, recording a $1.9 billion loss, according to accounts released yesterday.
As reported in The Age, the accounts show Seven’s partnership with KKK entered “negative equity” of $1.7 billion. Seven also lost $485 million from license values.
Rio Tinto has said its iron ore sales to China could be priced differently from next year, and is confident about gaining a better deal from the country.
“It is a situation that is evolving,” chief executive Sam Walsh said at an investors’ conference in Sydney. “Any number of scenarios could relate to an outcome in 2010, with one scenario being a different pricing mechanism in China to the rest of the world.”
“We will need to hear directly from Baosteel and CISA on what is their view in relation to prices.”
In the US, the stock market recorded better results as a number of economic reports produced optimistic forecasts. The S&P Industrials Index and the S&P Materials Index both rose by 1%. The Dow Jones industrial average gained 76.71 points, or 0.79%, to 9,789.44.
Manufacturing activity rose to the highest level in 3.5 years last month, according to the Institute for Supply Management. But president Barack Obama said more job losses are ahead.
“We anticipate that we are going to continue to see some job losses in the weeks and months to come,” Obama said. “There is always a lag of several months between businesses starting to make profits again and investing again, and then actually rehiring again,” he said.