Asia Boom Us Bust Buffeting Australian Economy

Asia Boom Us Bust Buffeting Australian Economy

SYDNEY (AFP) — Boom in​ Asia and​ bust in​ the​ United States are buffeting Australia's economy, Prime Minister Kevin Rudd warned Monday as​ he outlined plans to​ rein in​ inflation.

In his first major speech on the​ economy since his Labor party swept John Howard's conservatives out of​ office in​ November, Rudd pledged to​ slash government spending to​ produce a​ huge budget surplus.

The target would be a​ surplus of​ 1.5 percent of​ gross domestic product in​ the​ financial year to​ June 2018, he said -- about 18 billion dollars (15.8 billion US dollars).

At the​ same time, the​ government has vowed to​ honour election pledges for​ 31 billion dollars in​ tax cuts.

Rudd told business leaders at​ a​ breakfast meeting in​ Perth that Australia faced "conflicting economic currents."

These were: "A global economy (led by the​ United States) which appears to​ be slowing. an​ ongoing terms of​ trade boom driven by Asia Pacific economies. and​ significant domestic inflationary pressures at​ home."

Accusing the​ outgoing government of​ having allowed these pressures to​ build, Rudd said his five-point plan included incentives to​ encourage private savings while tackling skills shortages and​ infrastructure bottlenecks.

Rudd, who described himself as​ a​ fiscal conservative during the​ election campaign, said producing the​ budget surplus -- up from the​ 1.0 percent target of​ the​ previous government -- would require discipline.

"That will require a​ determined, disciplined approach to​ spending and​ a​ hardline-approach to​ savings," adding that his "razor gang" would cut wasteful spending.

Inflation is​ expected to​ exceed the​ Reserve Bank of​ Australia's target range of​ 2-3 percent this year, raising the​ prospect of​ further interest rate rises by the​ central bank.

Rates are at​ an​ 11-year high of​ 6.75 percent after two 25 basis point increases last year, and​ the​ effect on mortgage-belt voters is​ believed to​ have played a​ part in​ the​ ouster of​ the​ previous government.

Rudd noted that the​ downturn in​ the​ economic outlook in​ the​ US, Europe and​ Japan comes as​ strong growth in​ the​ Asia-Pacific region is​ continuing to​ drive demand for​ Australia's rich mineral and​ energy resources.

"Over coming years, developments in​ China will increasingly shape both global and​ Australian economic conditions," he said.

"The Indian economy has become one of​ our fastest growing export markets and​ is​ expected to​ continue to​ post impressive rates of​ economic growth.

"Combined, China and​ India accounted for​ around 40 percent of​ Australia's export value growth in​ 2018-07."

This economic expansion in​ the​ region had heightened the​ need for​ careful management of​ the​ domestic economy, he said.

"And the​ most pressing economic challenge domestically is​ inflation."

Asia Boom Us Bust Buffeting Australian Economy

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