The OECD has recommended the Australian Government should be prepared to delay its promised budget surplus if the Australian economy continues to weaken.
The Organisation for Economic Cooperation and Development said in a report the current interest rate and budget policies are appropriate to continue on a recovery path.
“In case of a sharper-than-expected cyclical weakening, the central bank should loosen further and the fiscal automatic stabilisers should be allowed to work, even if this postpones the return to budgetary surplus,” the Paris-based institution said.
“While monetary policy should be the first line of defence, if a new, full-scale global crisis of a similar magnitude as in 2008-09 breaks out, fiscal expansion to support activity would be warranted.”
The debate over the necessity of the surplus has been thrust into the spotlight recently, as figures within the business community have questioned the government’s self-imposed commitment to delivering a surplus in 2013-14.
Macmahon shares plummet on return
Shares in construction group Macmahon have plummeted in early trading after the company resumed trading on the ASX.
The decline in the company’s share price follows a capital raising and an announcement that it would move away from the construction industry.
Macmahon shares fell 14.8% to 19 cents this morning, following the statement.
“The funds raised under the offer will be used to strengthen the balance sheet following recent construction write-downs and to fund the future growth of the mining business,” the group said, with regard to the capital raising.
Shares flat after weak US lead
The Australian sharemarket has opened flat today, following a similar result in the United States where investors are still worried over the looming “fiscal cliff”.
The benchmark S&P/ASX200 index was down 0.2 points to 4,582.6 at 12.00 AEST, while in the United States the Dow Jones Industrial Average fell 74 points or 0.1% to 13,170.7.