Australian Budget aims for $5.47B surplus

Press, 24 August 1988, Page 11

Australian Budget aims for $5.47B surplus

NZPA-AAP Canberra The Australian Treasurer, Mr Paul Keating, last evening handed down a budget which will produce a $5.47 billion surplus in the 1988-89 fiscal year ended June 30.

The Budget surplus estimate, which represents 1.7 per cent of gross domestic product, compares with an actual surplus for 1987-88 of $2.04 billion, revised from $2.26 billion, and representing 0.7 per cent of G.D.P. Mr Keating announced no new major revenue measures, but total Budget revenue is estimated to rise 8.3 per cent in nominal terms or 2.1 per cent in real terms. Government outlays will rise 4.1 per cent in nominal terms, but in real terms will fall 1.8 per cent. As a percentage of G.D.P. outlays are estimated to fall to 25.6 per cent from 27.0 per cent in 1987-88. Important new measures announced in the Budget include: ® Further deregulation of the banking sector by ending the distinction between savings and trading banks and phasing out the

statutory reserves deposits scheme. • A 10 per cent increase in the family allowance supplement at a cost of $69 million in 1988-89. • A new job-training programme for long-term unemployed adults which is estimated to reduce unemployment benefit payments by $2.5 million in 1988-89. • A 30 per cent increase in health expenditure to $10.79 billion because of changes in health-funding arrangements. • A change in beer taxes which will lower the cost of a carton of lowalcohol beer $5.50 a carton and the cost of fullstrength beer $2.20, and will reduce Government revenue by $4OO million in 1988-89. Mr Keating estimated the change to beer taxes, together with reduced sales tax on women’s cosmetics and perfumes

cent and 4 per cent in 1990 if a successful wages-tax cuts trade-off could be negotiated. Australia’s inflation rate for 1987-88 was 7.1 per cent. The Budget assumes buoyant economic conditions for Australia, with continuing firm commodities prices expected to lead to a 9 per cent improvement in the terms of trade after a 9.4 per cent improvement- in 1987-88 and a 4.7 per cent deterioration in 198687. The improved terms of trade led to a current account deficit estimate of about $9.5 billion compared with $11.9 billion last year. The Government estimates GDP will show healthy growth, rising 3.5 per cent in 1988-89 after a 3.6 per cent rise last year according to figures released by the Bureau of Statistics last evening. Business investment is expected to increase

sharply, rising 12 per cent in the current year after a 9.9 per cent rise last year. Mr Keating said the surplus generated by the Budget meant that the net public sector borrowing requirement in 1988-89 would be zero. He said this would free up Australian savings to finance business investment and would also cut public sector demand which would, moderate over-all demand and reduce import pressures. As a result of the surplus, Mr Keating said the Government would continue to retire Commonwealth debt, which would assist in reducing Australia’s over-all debt burden. The Government expects to retire about $3 billion in net overseas debt, after net retirement of $1.6 billion in 1987-88. As well, net retirement of Treasury Bonds is expected to be about $3 billion after $2.2 billion last year.

and photographs, would reduce the rise in the consumer price index by about half a percentage point in the current year.

He reiterated an earlier estimate of a 4.5 per cent annual inflation rate by the end of the June year, and said the rate could fall to between 3.0 per