Sydney, April 23 (Inditop) Australia’s economy will contract 1.4 percent this year – but almost all other developed economies will shrink more, Treasurer Wayne Swan said Thursday.
He was commenting on an update from the International Monetary Fund (IMF) that forecasts an economic slump and Australian unemployment rising to 7.8 percent by 2010.
Swan said the outlook “is a much milder contraction than expected in almost every other advanced economy, which combined are expected to contract by an unprecedented 3.8 percent in 2009”.
He said that a contracting economic would “take a wrecking ball” to government revenues and bump up the deficit beyond the 115 billion Australian dollars ($80 billion) already predicted.
He stuck to the government’s mantra that surpluses were permanent but that deficits could only be “temporary” because the Labour Party policy was to balance budgets.
Swan chastised the opposition Liberal Party for deploring the exponential growth in government debt that accrued from successive billion-dollar stimulus packages.
“People who say that we shouldn’t be running a temporary deficit in these circumstances need to explain what they would do to avoid deficits,” he said. “What they’d have to do – and it would be utterly irresponsible – would be either to cut spending savagely or put up taxes in the middle of a global recession.”
Swan pointed to the IMF’s commendation for countries like Australia that went into debt to stoke consumer demand.
“The budget framework is to continue to provide economic stimulus, and that is certainly the recommendation of the IMF. It is also to invest in the future to set our economy up for the time that global recovery occurs,” he said.
Swan has spent the surplus of 21 billion Australian dollars, which he inherited from the previous government when Labour took office in December 2007, and expects to rack up a debt of more than 200 billion Australian dollars over the next four years.