The budget strategy has been unravelled after the Treasurer announced the government will not arrive at its self-imposed surplus target this financial year. The comments were made in a post mortem that revealed the government budget would fall short by $3.9 billion after a tax shortfall in the first four months of the year.
Swan’s self-set target was established in 2010 when he predicted a budget surplus three years ahead of schedule and before any other developed economy. He defended the decision to take the tax shortfall instead of cutting back radically to reach the surplus, which he said would threaten growth and employment. He has also said that he would rather support an economic end than focus on the politics of the deficit. For the Treasurer the result means that all five of his budgets will not have returned deficits. His predecessor Ralph Willis, who was Treasurer between 1993 and 1996, also failed to return a surplus.
And, even though economists have welcomed the move the opposition has highlighted that it means the current government cannot be trusted to manage the economy, or stick to their word. So far the deficit has been estimated to be as much as $20 billion instead of the original $1.1 billion surplus that was originally promised. Swan has defended the change by saying it was not caused by government overspending but rather because the required taxes had not been collected as expected.
Despite the outlook for the economy, Australians have been found to be the wealthiest they have been in the last five years even though the global economy and the increase in the cost of living has everyone talking, and complaining in most cases.
Over the course of the last year the average household wealth has improved by 18.4%, lifting it to $69,422 per person. The new data has been interpreted by some economists that locals are still repaying their debts aggressively and are reaping the rewards of a more robust share market.
Economists say the conservative spirit being demonstrated by consumer behaviour is largely unfounded as the economy is picking up and people have more disposable income and total wealth than they have had for a long time. Even though the global financial crisis saw households lose their most wealth ever individual wealth has undergone a serious recovery in recent months. The per person wealth index is still 5.1% lower than what it has reached over the last three years but it could grow more if the share market continues to improve.
The end of September saw a record $748.6 billion in deposits and cash made in banks such as Bankwest. Deposits and cash comprised 23% of assets in the country, well above the ten year average of 20.4%, and even though money is around many people are still not convinced that now is the best time to spend it. The global financial crisis is still fresh in people’s minds, utility costs are increasing and rumours of global financial insecurity are taking effect in the local market. For the consumer the greatest source of financial fear right now is the spiralling cost of living.
Economists say that despite the Governor’s attempts to allay insecurities and fears about the impending economic storm people are taking note of the clouds, regardless of whether the storm is on the horizon. One of the biggest driving factors fuelling the fear is the speed at which the economy can turn, a phenomenon which no one, including the Governor or Treasurer, have any control over. And while people may want to be optimistic about future prospects the perspective being offered by the economy is not doing much to put fears to rest.