Australia's new budget seen splashing cash in bid for votes
By Swati Pandey and Colin Packham
SYDNEY, March 29 (Reuters) - Discounts of up to 75 percent
have emptied shelves at grocer Golden Banana in a Sydney suburb,
but owner Micky Lapa won't be restocking - she's shutting after
Stiff competition, high rents and utility bills plus anaemic
household consumption have squeezed small businesses across
Australia, fuelling discontent with a conservative government
that opinion polls say will lose a federal election due by May
"I don't think I can vote for the current lot," Lapa said.
In an effort to arrest its slide in popularity, the
government led by Prime Minister Scott Morrison will on Tuesday
unveil a budget for the year starting July 1 that is expected to
feature an avalanche of spending.
Armed with stronger tax revenue and higher prices for
Australia's commodity exports, Treasurer Josh Frydenberg's
budget proposal will likely include increased infrastructure
spending, bigger personal tax cuts than made a year earlier and
possibly cash handouts to households.
Helping Frydenberg is an anticipated budget surplus of
around A$4 billion ($2.84 billion) for 2019/20, which would be
the first since 2007/08.
With the economy "ailing" and an election near, AMP chief
economist Shane Oliver expects the budget will have about A$6
billion more in tax cuts than the current one.
The upside of the government's strategy is that a budget
surplus "is within sight after a record 11 years in deficit and
the household sector will receive a boost just at the time it
needs it," Oliver added.
The downside, he said, is that tax cuts may provide a
smaller boost to the economy than putting checks in the mail or
lifting government spending.
HSBC economist Paul Bloxham expects tax cuts and spending
measures could deliver around A$8 billion-A$12 billion support
to the economy while Citibank economists predict one-off cash
transfers directly to households.
This budget could be the ruling coalition's last chance to
win back enough votes to retain the power it has had since 2014.
It has trailed its Labor opposition since mid-2016, according to
a widely-watched opinion poll.
But Morrison has to be careful his Liberal Party doesn't
undermine its argument that it is a better economic and fiscal
manager than Labor.
"The government has carved out a reputation as a trusted
manager of the economy," said Rodney Smith, a political science
professor at the University of Sydney. "A budget that is clearly
a bid to buy votes would be transparent and risks its
A cash splash should be welcomed by the Reserve Bank of
Australia (RBA) as an expansionary budget should help combat a
slowdown in domestic activity.
Annual economic growth eased to a sub-par 2.3 percent in the
last three months of 2018, while early indicators suggest this
year has started on a weak footing, prompting financial markets
to price-in an interest rate cut in August.
The central bank has left rates at a record low 1.50 percent
since August 2016 and has shown no inclination to cut them
anytime soon, despite a tumble in the property market.
And the April 2 budget is unlikely to provide much boost to
housing prices as home affordability and wealth inequality
remain political issues.
The household tax-to-income ratio has risen to a 13-year
high, according to ANZ economist Cherelle Murphy, weighing on
"Public is not willing to spend, they go for the cheaper
options," Golden Banana's Lapa said. "I cannot live off the
crumbs left by the big guns, it's just not possible anymore,"
she added, referring to Australia's expanding supermarket
($1 = 1.4126 Australian dollars)
(Reporting by Swati Pandey and Colin Packham; Editing by
© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.