Australia’s economy will recover faster than anticipated from last quarter’s contraction driven by a record mining boom, and the government won’t relent to pressure to scrap new taxes, Finance Minister Penny Wong said.
The economy will be underpinned by a $430 billion pipeline of investment in minerals and energy, Ms Wong told Bloomberg Television in an interview in Sydney. The government is committed to introducing resource and carbon taxes, she said.
The 1.2 per cent fall in gross domestic product, the biggest since 1991, was “slightly larger than the Treasury indicated, but then you’d anticipate a stronger rebound,” she said. “We have to take a step back and look at what’s coming. This is the largest investment pipeline our nation’s ever seen.”
Australia’s economic outlook, accompanied by the lowest debt-to-GDP ratio among advanced economies, helped make its dollar the second-best performing major currency in the past year, climbing about 22 per cent against its US counterpart. The government faces opposition over a planned carbon tax to cut Australia’s emissions, the developed world’s biggest per capita, and a levy on surging mining profits.
The Carbon Tax
Ms Wong, a former climate-change minister, said that while plans to charge polluters for emissions is a “tough reform,” the government “will stay the course” on it.
“People will see that the sky doesn’t fall in, that the wheels of life in the economy will continue to turn and I suspect it will become far less controversial,” Ms Wong said.
“It’s about investing in our economy for the future, making it more resilient and increasing our capacity,” Ms Wong said of the mining tax. “It’s a very, very important policy and one that I think people can see the sense of.”
The Budget surplus
Gillard’s government is seeking to return its budget to surplus by 2013 and Ms Wong said today that target to erase the deficit is essential for the economy. Wong is helping oversee that effort.
“When you’ve got that kind of investment wave in your nation you have to make space for it, you don’t want to be adding to the price pressures which inevitably accompany that kind of investment,” she said. “Coming back to surplus is a very sensible economic policy and that’s why we’re committed to it and that’s why we’re on track to achieve it.”
The Reserve Bank of Australia has said the nation’s benchmark interest rate, already the highest in the developed world at 4.75 per cent, will probably have to rise further to contain price pressures. Governor Glenn Stevens said in a June 15 speech that fiscal policy is playing a “significant role” in helping restrain the economy.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.