Australia to invest $77b in roads as part of ‘contribute and build’ budget

Govt readies for end of ‘age of entitlement’ budget

PERTH, May 11, (Agencies): The Australian government will co-fund an A$82 billion ($77 billion) road infrastructure plan to help stimulate investment and create jobs as the impact of the country’s mining boom fades, Treasurer Joe Hockey said on Sunday.

In a television interview ahead of his government’s first annual budget, to be delivered next week, Hockey announced the plan to spend more than A$40 billion on roads over the next six years, to be topped up by some A$42 billion from state governments and private investors.

“We are laying a plan for the biggest increase in road expenditure in Australian history,” Hockey told the Channel Nine Network.

“That is tens of thousands of new jobs, but most importantly, it is going to address the significant drop-off in investment in construction in Australia associated with mining investment coming off.”

He dubbed the economic blueprint his government will deliver on May 13 a “contribute and build” budget.

Australia’s A$1.5 trillion economy sailed through the global financial crisis, but a slump in mining investment and a sluggish response to record low interest rates has hit government tax income as expenditure continues to grow.

Australia’s first budget under conservative Prime Minister Tony Abbott to be released Tuesday promises to end the “age of entitlement”, with spending cuts and tax rises expected as the nation strives to rein in its deficit.

After 22 years of continuous economic expansion, Australia is confronting growth which remains stubbornly below trend and unemployment rates of around 6.0 percent. At the same time, Australia’s budget deficit for the 2013/14 financial year is forecast to have ballooned to Aus$47 billion ($44 billion), with fiscal deficits projected through to 2016/17.

Argues

The government argues that without change, the budget will be in deficit for the next decade and Abbott has called on all Australians to help “chip away at the debt and deficits”.

Eight months after his election victory, his government is expected to lift income tax for high earners, reintroduce an excise on petrol and make cuts to spending.

Treasurer Joe Hockey told The Weekend Australian on Saturday that industry assistance — such as tax breaks or financial incentives — was also on the chopping block.

“The fact is that when I said there’s going to be an end to the age of entitlement, everyone has to contribute,” Hockey told the paper.

“Business will benefit out of a stronger economy and a leaner public sector that will come out of this budget.”

Hockey has suggested a “new agenda” in taxation in which those who have the capacity to pay, pay their fair share, including a tax levy on high earners to help pay down the deficit. Jakob Madsen, an economics professor at Melbourne’s Monash University said the government was right to tackle the deficit.

“They should definitely do something about it, I agree, because why should future generations pay for us? But definitely it’s not a crisis at all,” Madsen told AFP.

Madsen said the ratio of government debt to GDP was 35 percent, a level it reached during the 1991-92 recession, but far below the more than 100 percent level of countries in the grip of a debt crisis. “The deficit is 3-4 percent of GDP. It’s not crisis level, but it’s a big deficit when the economy is not in a recession,” he added.

Australian government revenues have dropped dramatically in recent years, in part due to income tax cuts introduced in 2007 during the boom years, and this needed to be corrected, Madsen said.