The Australian government in its annual budget forecast a record deficit for 2009/2010 as measures to stimulate the contracting economy raised government spending.
The budget deficit is set to rise to A$57.59 billion for 2009/2010 from A$32.11 billion shortfall in fiscal 2009. Treasurer, Wayne Swan said the budget would turn into surplus by 2015/16 with economic recovery.
He forecast the fiscal deficit to rise to A$53.1 billion in 2009/2010, representing a 4.5% of GDP. Further, this is expected to reach A$56 billion in 2010/2011, equivalent to 4.6% of GDP. Swan said the global recession has stripped nearly A$210 billion from expected tax receipts over the next four years.
The budget forecast the economy to contract 0.5% in 2009/2010 before growing 2.25% in 2010/2011. Meanwhile, the unemployment rate is seen at 8.25% in 2009/2010.
In his budget speech, Swan said, Not since the Great Depression has Australia confronted a more difficult set of global economic conditions.
The government plans to invest A$22 billion in infrastructure to improve the quality, adequacy and efficiency of transport, communications, energy, education and health sectors. The budget paper said the Government's investment in nation building infrastructure will support an average of around 15,000 jobs each year, at around 18,000 in 2011-12.
The government also reformed its pension system to offer adequate financial support and security to those who have been instrumental in building the nation through tough times and good.
According to the new arrangements, the government will provide an additional A$32.49 a week for single pensioners on the full rate of pension and A$10.14 a week for pensioner couples (combined) on the full rate of pension.
Swan said the government would progressively increase the qualifying age for the Age Pension to 67 beginning 2017.
In recognition of the special role carers play and the costs they bear, the Government will introduce a permanent Carer Supplement of A$600 per annum for Carer Payment recipients and an additional A$600 per annum for Carer Allowance recipients for each eligible person in their care.
The government further plans to fully implement the reduction in personal income tax by A$47 billion over four years. This tax cut is directed to low and middle-income families.
The Government decided to ease the burden of child care costs, and make it easier for parents who wish to return to work, by raising the Child Care Tax Rebate to 50% from 30%.
To improve housing affordability, Swan said the government's A$2.2 billion housing affordability package will help working families struggling with housing affordability crisis. Further, it will introduce enhanced First Home Saver Accounts. Accordingly, the first A$5,000 of individual contributions will now attract a Government contribution of 17%, earnings will be taxed at a low rate of 15%, and withdrawals will be tax free if used to buy or build a first home.
Again, to reduce rental expense, the National Rental Affordability Scheme will encourage the construction of up to 50,000 new affordable rental properties by 2011-12.
Managing Director of Housing Industry Association, Ron Silberberg said the Budget also recognizes the need to invest in skills in the down time so that there will be a greater availability of people with employable skills when the recovery takes hold.
The Australian National Retailer's Association commented that the 2009-2010 Federal Budget takes a long-term and hopeful view of Australia's powers of recovery. It is a 'dig deep and hope the recession ends soon' approach.
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