Courageous attempt

Press, 9 November 1984, Page 3

Courageous attempt

By

ADRIAN BROKKING,

finance editor

Farmers and superannuitants may not agree but on the whole this is a good Budget It is the most courageous attempt for some time to change the course of the economy on to a path that may lead to expansion; a Budget that for once does not buck the laws of economics.

It managed to reduce the Government deficit by about $l7O million for the not quite five months left in this financial year, while at the same time injecting $156 million into measures aiming to improve the lot of low-income families. The burden has been fairly evenly and certainly reasonably equitably spread. Most of the reduction in the deficit this financial year is borne by the Post Office (40 per cent). A further 17 per cent comes from the changed distribution ,of oil revenue. ~

Another pre-Budget measure, the changes in tariffs and tendering as industry assistance, provides 12 per cent of the reduction. Increased taxes on

tobacco products and alcoholic beverages fund 10 per cent, and increased transport charges a further

8.5 per cent, of which higher road fuel tax provides almost two-thirds. The balance of about 14 per cent comes equally from a reduction in farm subsidies and an increase in the standard tax rate.

On balance, this Budget is likely to be deflationary rather than inflationary, for its duration. In this regard, the road-user charges cause most concern, as they will spread over the prices of many goods. However, the increase for this year amounts to only $9 million. Next year electricity, prices will rise 25 per cent. Although a sensible measure from the point of view of resource allocation, once again this increase will find its way into the cost of many other goods. Some inflationary pressures. are likely to persist, but these Will be offset in the medium term by the substantial.reductions in the internal deficit that are in prospect — especially if the Government maintains a firm monetary policy.