Australia’s conservative government unveiled an economic blueprint on Tuesday aimed at creating jobs and growth in “extraordinary times”, just hours after the country’s central bank slashed interest rates to an all-time low.
Stealing the thunder from the government’s annual budget, the Reserve Bank of Australia (RBA) cut the cash rate by a quarter percentage point to 1.75 percent, citing surprisingly low inflation and uncertainty about the global outlook.
This year’s spending plan had an unusually high degree of difficulty as it effectively doubles as the launch of an unofficial election campaign after Prime Minister Malcolm Turnbull said he planned to use a political deadlock to dissolve parliament.
With the polls narrowing, the government is keen to drive home the message that it alone can be trusted to manage an economy hampered by a once-in-a-century mining downturn and balance public finances after years of deficits.
“These are extraordinary times,” Morrison told parliament in his budget speech. “At such a sensitive time, none of us can become complacent or make decisions that could put our successful transition at risk. There is too much at stake.”
As expected, the budget stuck by the government’s pledge to live within its means, offering little in the way of vote-buying sweeteners despite the looming July 2 election.
“This is not the time to be splashing money around or increasing the tax burden on our economy,” the Treasurer added.
The government did promise to lower the corporate tax rate for small firms to 27.5 percent from July and broaden the middle-income tax bracket so fewer people would be hit by the second top marginal tax rate of 37 percent.
“While these are modest changes to our personal income tax system … they are affordable. They are not funded by higher deficits or higher borrowing,” Morrison said.
On revenue boosting measures, the government said it is cracking down on tax avoidance by multinational companies, proposing a UK-style diverted profits tax (DPT).