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SYDNEY: Australia's "extraordinary" performance as the fastest-growing economy in the developed world should not mask the risks it still faces, Treasurer Wayne Swan said Sunday.
Australia's resource-rich economy has avoided recession during the financial crisis and surged to 0.6 per cent growth in the second quarter of the year, outperforming its global peers.
But Swan said uncertainty about the world economic outlook meant it was too early for the Australian government to consider unwinding more than A$70 billion (US$60 billion) in stimulus spending.
"There's no doubt that we did have an extraordinary growth number for the June quarter but even in Australia we are facing these global headwinds," he told public broadcaster ABC from London, where he is attending a G20 meeting.
"You've seen a big cut to national income. You've seen export income cut in the last three months alone by about A$11 billion. We've got very weak business investment."
Swan said the government stimulus package would continue to prop up the economy in the short term, until private demand had recovered sufficiently to take up the slack.
"It's been designed deliberately that way because when the global economy recovers and private demand grows sustainably that's precisely the time that stimulus should be reduced," he said.
In the longer term, Swan said Australia planned to cap government spending when economic growth returned to normal in a bid to rein in the debt incurred from the stimulus splurge.
He said a two per cent cap on new spending would kick in when economic growth returned to long-term trend levels of three per cent, a figure last recorded in the first quarter of 2008.
The government handed out A$10.4 billion to pensioners and others in December, then earmarked A$42 billion in February for measures including cash bonuses to eligible taxpayers and a massive school refit programme.
It followed up in the May budget with A$22 billion of infrastructure spending, which is yet to fully feed through into the economy.
- AFP/yb
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