Economy
Treasurer Wayne Swan delivered the Rudd government's first budget in May 2008, which he said was designed to fight inflation. Total expenditure, as a share of gross domestic product (GDP), was lower than at any time of the previous government, despite including many of the expensive election promises for "working families". The projected surplus of 1.8% of GDP, or $21.7 billion, exceeded the 1.5% target set by the government in January. Labor supported improving the federal-state funding process through a reform of the Council of Australian Governments. Three nation-building investment funds were established—the infrastructure fund, "Building Australia", was earmarked $20 billion of federal funding. Education received $10 billion as part of Rudd's "education revolution", while health also received $10 billion.
As part of its response to the financial turmoil of the Global Financial Crisis, the Rudd government announced in October 2008 that it would guarantee all bank deposits. The government initially ignored RBA advice to cap the guarantee. After serious distortion of the Australian financial system, the government modified the guarantee, requiring a premium to be paid for amounts over $1 million.
With the economy facing its biggest slowdown since the early 1990s and facing recession, the government announced an economic stimulus package worth $10.4 billion.
A second economic stimulus package worth $42 billion was announced in February 2009. It consisted of an infrastructure program worth $26 billion, $2.7 billion in small business tax breaks, and $12.7 billion for cash bonuses, including $950 for every Australian taxpayer who earned less than $80,000 during the 2007-8 financial year. At the same time the Reserve Bank cut official interest rates by 1 percent to 3.25 percent, the lowest since 1964.
The package was welcomed by state governments and many economists, as well as the OECD. The Malcolm Turnbull-led coalition opposed the package, stating they believed further tax cuts on top of current tax cuts planned for each financial year over the next few years was a better way to prevent a recession. The package was passed in the Senate on 13 February with support from minor parties and independents following amendments that reduced the cash bonuses in the package in order to fund investment in the environment and water.
National accounts released on 4 March 2009 which correspond to the December quarter showed that Australia's non-farm economy was in recession, according to the government's definition of the term.
The 2009 Australian federal budget was released on the evening of 12 May 2009. Labor decided not to extend the investment allowance, and it was phased out by the end of the year. Other measures to support employment—augmenting a first-home buyer's scheme— were initiated.
The March quarter national accounts showed that the Australian economy grew by 0.4%, a number not foreseen by many until the positive balance of trade statistics released the day before. The main contributors to this result were the large fall in the current account deficit and increasing household consumption. Apart from the manufacturing sector, the Australian economy avoided a technical recession. Reserve Bank economists endorsed the first two phases of stimulus a year later, saying it was "undeniable" that government spending had supported the economy. RBA governor Glenn Stevens remained cautious of American-style fiscal policy, casting doubt on the idea that Australia should have a higher inflation target in order to repair its public accounts.
The Rudd Government established a review of the tax system by the head of the Department of the Treasury, Ken Henry. Among other suggested reforms recommended by the Henry review and adopted by the Rudd Government was a Resource Super Profits Tax on the extractive industry. The proposal met resistance from mining industry bodies and mining companies, and the proposal was later heavily modified when Julia Gillard replaced Rudd as Prime Minister.
Read more about this topic: Rudd Government
Famous quotes containing the word economy:
“I favor the policy of economy, not because I wish to save money, but because I wish to save people. The men and women of this country who toil are the ones who bear the cost of the Government. Every dollar that we carelessly waste means that their life will be so much the more meager. Every dollar that we prudently save means that their life will be so much the more abundant. Economy is idealism in its most practical terms.”
—Calvin Coolidge (1872–1933)
“The aim of the laborer should be, not to get his living, to get “a good job,” but to perform well a certain work; and, even in a pecuniary sense, it would be economy for a town to pay its laborers so well that they would not feel that they were working for low ends, as for a livelihood merely, but for scientific, or even moral ends. Do not hire a man who does your work for money, but him who does it for love of it.”
—Henry David Thoreau (1817–1862)
“Even the poor student studies and is taught only political economy, while that economy of living which is synonymous with philosophy is not even sincerely professed in our colleges. The consequence is, that while he is reading Adam Smith, Ricardo, and Say, he runs his father in debt irretrievably.”
—Henry David Thoreau (1817–1862)