Australia stands by budget forecasts
CANBERRA: The government on Wednesday defended as conservative forecasts that Australia's economy will grow rapidly once it emerges from a mild two-year recession.
The forecast of a stellar recovery beginning late next year is part of the government's strategy revealed Tuesday to sustain jobs during the global downturn by going deep into debt through spending on infrastructure and other measures.
But analysts and opposition lawmakers - who could block the spending in the Senate where the government lacks a majority - have described the growth forecasts as optimistic.
Treasury predicts that the stagnant Australian economy will contract by half a percentage point in the next fiscal year beginning July 1.
But with the government's planned stimulus spending, the economy will grow by 2.25 percent in 2010-11 and 4.5 percent in each of the following two years.
Australian growth is rarely sustained above 4 percent and the nation's long-term average is 3 percent.
Treasurer Wayne Swan, the architect of the economic blueprint, told the National Press Club on Wednesday that the forecasts provided by treasury officials were "reasonably conservative." He said the Australian economy had bounced back with above-average growth after recessions in the 1980s and 1990s.
"The forecasts are very realistic," Swan said.
While the International Monetary Fund predicted Australian growth of only 1.1 percent in 2010, Swan said treasury had more accurate information about the effects of billions of dollars of government stimulus spending that have been pumped into the economy since October last year.
Swan revealed Tuesday that the latest treasury data indicated the current fiscal year would end with a 32 billion Australian dollar ($25 billion) shortfall - the first budget deficit in seven years.
The government plans to increase the debt by another AU$58 billion in 2009-10 and AU$188 billion over four years.
It plans to safeguard 210,000 jobs through AU$22 billion in new infrastructure spending on roads, rail, ports, universities, hospitals, a national broadband network and experimental clean energy technologies such as burying carbon air pollution from coal-fired power stations underground.
Forecasting a quick return to strong growth, the government expects to balance the budget by 2015-16.
But opposition leader Malcolm Turnbull said the debt levels were too great and the economic growth projections "too optimistic." "Miracles do happen, but not that often," Turnbull told Fairfax Network Radio.
The government blames the deficits largely on a fall in tax revenue due to the global recession.
Treasury had downgraded Australia's projected tax revenue by AU$210 billion, or 15 percent, over four years due to the downturn.