Rudd's plan to beat inflation -- by spending cuts!

Although I was virtually alone among Australian conservatives in predicting that Rudd would be roughly as conservative as he said he was, this still has rather gobsmacked me. This is as fiscally conservative as you get

Kevin Rudd will fight inflation with a "hardline" budget surplus target of up to $18 billion to be achieved through savage spending cuts. Outlining in Perth today a five-point plan to fight inflation, the Prime Minister will set a new target for the budget surplus of 1.5per cent of the nation's gross domestic product. The move follows the Howard government's pledge made during the election campaign to maintain a budget surplus of 1 per cent of GDP.

Mr Rudd will also flag new policies to create "real incentives" for private saving. He did not elaborate on the measures yesterday at a "community cabinet" session in Perth during which he and his ministers took questions from the public, but the reforms could include policies to encourage superannuation and savings plans to promote home ownership. These measures would have the potential to take pressure off home interest rates by slowing the surging pace of consumer and business spending that has the Reserve Bank worried.

Blaming the Howard government for failing to tackle inflation, Mr Rudd will also warn of new spending cuts to be unveiled in the May budget, beyond the $10 billion savings plan outlined in last year's election campaign. However, the Prime Minister yesterday signalled that he remained committed to delivering tax cuts of more than $30billion, and warned the current tax system was "too complex" and served only the interests of accountants. [Hear here!] "The future of the national economy is core business for the new Government of Australia," Mr Rudd will say in his speech today. "We are embarking on a hardline approach to fiscal discipline - aiming for a budget surplus of at least 1.5 per cent of GDP in 2008-09, provided growth prospects remain as currently anticipated. "This is higher than the target outlined by the previous government as recently as November. "It won't be easy. In going to the election we announced $10billion in savings over the forward estimates. We will be looking to make savings beyond that through our razor gang."

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Posted by John Ray

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