Australia will splash out on infrastructure to spur GDP

CANBERRA: Australia’s government announced yesterday plans for major infrastructure spending including a new Sydney airport and an inland railway linking two major cities, while sticking to its goal of restoring a budget surplus in three years.

Treasurer Scott Morrison said that more than A$75 billion (US$56 billion) would be spent on infrastructure in the next decade.

“It is important to invest in infrastructure, but we have to make the right choices on projects as part of a broader economic growth strategy,’’ he said in his budget address to parliament.

The government plans to spend A$5.3 billion on building a second international airport in Sydney which is due to open in 2016. It also plans an A$8.4 billion 1,700-kilometre new railway corridor between Melbourne, Australia’s second largest city, and the third largest city, Brisbane. Work on both projects is to begin in the fiscal year which starts July 1.

The government also plans to increase taxes and charges.

A new levy on Australia’s five largest banks was expected to raise about A$1.5 billion (US$1.1 billion) a year.

The levy that Australians pay for their universal health care system would increase to help pay for a newly established disability insurance scheme.

Universities will get 2.5% less government funding over the next two years and students will have to pay more for their degrees.

Employers will pay an annual levy of up to A$1,800 (US$1,322) for every foreign worker they employ on a temporary visa.

The government estimated the deficit for the current fiscal year ending June 30 will be A$37.6 billion (US$27.6 billion), A$500 million (US$367 million) worse than was forecast a year ago.

Revenue is expected to grow 7.8% next year to A$444.4 billion (US$326 billion), and the deficit will shrink to A$29.4 billion (US$21.6 billion).

The government expects growth will increase from 1.75% in the current fiscal year to 2.75% next year. Unemployment is expected to stay steady at 5.75%.

It gave up on making cuts in health and education spending that the Senate has been rejecting as unfair to the poor since the conservative ruling coalition’s first budget in 2014.

Major ratings agencies have warned that Australia risks losing its coveted triple-A credit rating unless the government can cut spending.

Morrison said he expected the agencies would be impressed that his latest budget maintained its trajectory toward a surplus in three years.

The government plans to increase defense spending to 2% of GDP by 2020-21 — three years ahead of its initial target. That may please US President Donald Trump, who has urged America’s allies to increase their military spending.