Submission to the 2012-13 Federal Budget
14 February, 2012 | Submission
Australia’s economy has been a standout performer among developed nations for the past five years and has proved resilient to whatever shocks have been thrown at it, but as the Federal Government begins to frame the 2012-13 Budget, dark clouds are gathering on the horizon.
Most of Western Europe remains mired in recession – exacerbated by government austerity measures - and despite some recent encouraging signs, the United States is fragile. The prolonged global slowdown continues to pose threats to Australia.
Manufacturing and export industries are buckling under the weight of a dollar that has now leapt beyond parity with the Greenback. In this latter respect, Australia is a victim of its own success, with the dollar’s rise driven by the mining boom.
And the mining boom itself is isolated to two states, leaving Australia’s economy looking like a patchwork quilt. It is in this context that the ACTU has prepared this submission to the 2012-13 Budget.
The ACTU submits that the over-riding priority of the 2012-13 Budget must be to protect and sustain jobs in Australia.
Early and comprehensive action by the Labor Government in late-2008 and early-2009 pre-empted the slowdown and provided the stimulus that sustained domestic demand and minimised job losses during the Global Financial Crisis.
This remains an outstanding achievement that is recognised worldwide, if not fully appreciated domestically because of a cynical campaign by the Opposition for political gain.
Strong fiscal rules, including a pathway to return to surplus, were integral in the 2008 and 2009 packages.
The Government has publicly stated its goal of returning the Budget to surplus in 2013.
The ACTU submits that given the uncertain global economic environment, the government must stand ready to adjust its fiscal priorities and its planned return to surplus in order to protect jobs, should the circumstances require it.
The ACTU is not suggesting that the Government should abandon its fiscal rules, but rather that the timetable for tightening fiscal policy should be contingent on macroeconomic conditions.
As we did last year, the ACTU notes that on the key measures of GDP growth and employment, Australia is outperforming its peers. Since the Labor Government was elected in 2007, 718,200 additional jobs have been created, and unemployment has averaged 5.0%. Australia has recorded average annualised GDP growth of 2.1% since March 2008.
From a peak of 5% in September 2008, the rate of inflation is now 3.1%. The Reserve Bank’s cash rate is now 4.25%, compared to 6.75% in November 2007.
In its statement of 7 February, following its decision to leave interest rates on hold, the Reserve Bank noted that the economic outlook for Australia was looking more positive than it had at the end of 2011.
However, its stance remains that should the economy weaken materially, it is ready to ease monetary policy. The Government’s approach to fiscal policy must be the same.
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