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Australia warned not to rely on resources
Source: Bloomberg News |
September 24, 2012, Monday
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Print Edition
Print Edition
AUSTRALIA can't rely on its resources boom to ensure better living standards over the next decade and the government needs to tighten its budget to create room for interest rate cuts, Trade Minister Craig Emerson said.
A government commitment to restore the budget to surplus this fiscal year after four years of deficits will be achieved through spending cuts and possible tax increases, Emerson said in an interview yesterday with Sky News television. While the Reserve Bank of Australia lowered the cash rate by 1.25 percentage points from November to June, the benchmark borrowing cost at 3.5 percent is still the highest among major developed economies.
"We can't just be reliant purely or primarily on minerals and energy. This government recognizes that," Emerson said. "It would be a good thing if the government gave the Reserve Bank the capacity, if it so desired, for further interest rate reductions."
Australia has managed to avoid recession for 21 years as China's infrastructure-led economic stimulus fueled demand for commodities such as iron ore and coal, driving the country's trade balance to a 40-year high in 2010. Australia now has one of the developed world's lowest debt burdens, at just 27 percent of gross domestic product, and its highest interest rates at 3.5 percent.
A warning last week by economist and government adviser Ross Garnaut that the country would face declining living standards as prices of exported commodities fall was wide of the mark, Emerson said.
A government commitment to restore the budget to surplus this fiscal year after four years of deficits will be achieved through spending cuts and possible tax increases, Emerson said in an interview yesterday with Sky News television. While the Reserve Bank of Australia lowered the cash rate by 1.25 percentage points from November to June, the benchmark borrowing cost at 3.5 percent is still the highest among major developed economies.
"We can't just be reliant purely or primarily on minerals and energy. This government recognizes that," Emerson said. "It would be a good thing if the government gave the Reserve Bank the capacity, if it so desired, for further interest rate reductions."
Australia has managed to avoid recession for 21 years as China's infrastructure-led economic stimulus fueled demand for commodities such as iron ore and coal, driving the country's trade balance to a 40-year high in 2010. Australia now has one of the developed world's lowest debt burdens, at just 27 percent of gross domestic product, and its highest interest rates at 3.5 percent.
A warning last week by economist and government adviser Ross Garnaut that the country would face declining living standards as prices of exported commodities fall was wide of the mark, Emerson said.
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