Like everywhere else, Australia was hit hard by the Global Financial Crisis. Today while other countries, most notably, France, Germany, the UK and the Netherlands all teeter on the brink of double-dip recession and economic woes, Australia is poised
for a budget surplus in 2013.How did Australia do it? Did they cut government programs? Were there huge public sector layoffs? Did they give the super-rich insane tax breaks? Below are key components of
Australia’s budget and the surplus it will create:
- Cut defense spending by $5.4 billion.
- Postpone increases to foreign aid.
- Enact a budget aimed at supporting lower-income families.
- Give the Reserve Bank room to cut interest rates for families.
- $5 billion stimulus payout to households, with extra help for students.
- $714 million to help companies compete.
- $3.7 billion in small business tax breaks.
- Top earners will pay increased premiums to pension funds.
- Only 3,000 public sector workers suffer layoffs. Unemployment currently 5.5% is predicted to drop to 5% by 2013.
- 30% carbon tax on the burgeoning profits of iron and coal miners; will raise $11 billion over the next three years.
Bear in mind that these are relatively large figures by Australian standards. Their economy is not nearly as large as the US or the UK. The current Australian deficit is $44.4 billion (~3% GDP), with a
predicted budget surplus of $1.5 billion by this time next year.
Local politics aside,
Australia makes the case – stimulus and taxation are effective during economic downturn. All these measures: cuts to defense spending; raising taxes on big business; issuing tax breaks for small business and the working class; and stimulus to low income families serve to create budget surplus. On the other hand, France, Germany, the UK and the Netherlands show us that
austerity measures only make matters worse. This is definitely an economy we should continue to track.
