The 2012‑13 Budget was framed in the context of the Australian Government’s commitment to returning the budget to surplus in 2012‑13, the challenges posed by a two-speed economy, the uncertain global environment and the political realities of Australia’s hung Parliament.
Given Australia’s relatively strong economic fundamentals some degree of fiscal tightening at this point appears warranted. Fiscal consolidation has the potential to take pressure off interest and exchange rates, and therefore help manage the challenges posed by the marked divergence in the performance of the resources and non-resource sectors. However, continuing uncertainty from the European sovereign debt crisis, softer macroeconomic conditions in China and the appreciation of the Australian dollar, pose significant downside risks for the Australian economy.
As well as the short-term effects of the Budget on Australia’s economic performance, another important consideration is how well the Budget positions Australia to meet longer‑term challenges. The initiatives in this Budget to reform the tax and transfer system are modest, and there are few measures specifically aimed at improving productivity, such as big-ticket infrastructure items. There are, however, some measures to increase workforce participation. And there are some signals of new spending priorities on the social policy front including the National Disability Insurance scheme, aged care and health services which will help to meet the needs of an ageing population.
The Parliamentary Library has produced its annual Budget Review to assist parliamentarians consider the key issues posed by the 2012‑13 Budget. The first article, Budget 2012–13: Key Features, as well as examining the international and domestic context of the Budget, contains a macroeconomic analysis and commentary on the Budget including the assumptions that underpin the Government’s fiscal policy and the estimates of revenue and expenditure that underlie that policy. The other articles examine key measures that cover a wide range of areas across all portfolios.
As with previous Budget Reviews, this year’s has been prepared under time pressures with a view to making it available to parliamentarians as soon as possible. While care has been taken to ensure that the articles are accurate and balanced, they are based on information that was publicly available at the time of preparation. The articles do not intend to make value judgements about the relative importance of different measures or provides a comprehensive assessment of the Budget.
Parliamentarians are invited to raise points requiring amplification or clarification directly with the research specialist concerned and general comments on papers are also welcome. Any other feedback should be forwarded to me.
Dr Dianne Heriot
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