Another Treasurer (Asst) that doesn't understand economics?
Abbott government to consider even more spending cuts, says Assistant Treasurer Josh Frydenberg
1. The Abbott government will consider making even more spending cuts in coming months as it deals with the dramatic fall in global oil and gas prices, new Assistant Treasurer Josh Frydenberg says.
Now Mr Frydenberg has warned that the government will have to take these new price falls into account as it prepares its next budget – which is due in four months – and that means more spending cuts will have to be considered.
"Australia focuses its exports on resources and LNG is one of those resources … [we've seen a] fall in the iron ore price by around 50 per cent from the beginning of last year, we've seen the oil price fall by a similar figure, we've also seen downward pressure on coal and wheat," Mr Frydenberg said on Wednesday.
"The numbers will be reviewed when it comes round to the next budget in May but there's no doubt this is putting pressure on government revenues.
BUT
2. HSBC chief economist Paul Bloxham says the fall in global oil prices ought to provide a net benefit for the economy, so even more spending cuts may not be necessary.
He says lower oil prices will boost economic growth, and that in turn will encourage employment growth and boost company tax receipts, and that these should override any declines in mining royalties associated with lower LNG prices.
"The lower oil price is, on net, a positive story for Australia and for the government," Mr Bloxham told Fairfax Media.
"The lower petrol prices, and lower energy costs for Australian households and businesses, should support more growth in household spending and business investment. Those things are likely to translate into more tax revenue for the government overall.
"You've got to be careful not to look at this as some partial analysis that just looks at LNG, you've got to consider the broader effects on the overall economy."
http://www.canberratimes.com.au/federal-politics/political-news/abbott-government-to-consider-even-m...
