Mr Michaels said he expected business investment to grow at a rapid pace over the next couple of years. "The changing industry mix means company revenues are lower than they usually would be, and this is putting pressure on the budget in the medium term." "(As) the mining sector and related sectors expand, other sectors have to grow more slowly to make room for that without allowing inflation to get out of control. and the capital gains tax share of the economy has fallen," he said. "Tax revenue has been growing more slowly than it did in the GFC. "This has damaged corporate profits and company tax revenue in Australia," he said.Īs a result, this year's surplus has blown out by about $7 billion, he said. He said the European crisis late last year had contributed to volatility in financial markets leading to a fall in confidence, demand and commodity prices. Mr Michaels warned that we might see another GFC type event come out of Europe and this will be damaging for growth. "Surplus in the medium term gives us the scope to do it again if we need to." and this enabled us to throw cash at the economy. We had been running surpluses, benefiting for the commodities boom. "The reason we got through the Global Financial Crisis (GFC) unscathed is that we were in a very good budget position. He said the economy hasn't been growing as quickly as expected, and now wasn't the right time for the Government to be putting pressure on the economy by cutting spending and raising revenue.īut this "medium-term strategy is the right one, by getting back to surplus and gradually paying down the net debt," he said. "Returning the budget to surplus is the right approach and the Government should be aiming to get back to surplus in the medium term," Australia and New Zealand Banking Corporation, Senior Economist, Craig Michaels told a CEDA audience in Melbourne.
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