FED: Swan says budget deficit inevitable=2

AAP General News (Australia)
02-01-2009
FED: Swan says budget deficit inevitable=2

That follows a prediction from the International Monetary Fund (IMF) last week that
the economy would contract, shrinking by 0.2 per cent in 2009. But the average deficit
across developed nations is even per cent, it said.

The Reserve Bank of Australia (RBA) is tipped to cut interest rates again next week
by as much as 75 basis points.

Mr Swan said the $50 billion reduction in tax receipts over four years was enough to
push the budget into deficit on its own but there would be other impacts as well.

He said in the mid-year economic forecast in November the government wrote down revenues
from all tax sources by $40 billion.

Since then, the global situation had deteriorated further and Australia was not immune.

"The global recession will give Australia a temporary deficit but of course that is
happening right around the world," he said.

"We are much better positioned than many other countries."

Mr Swan said Australia had to respond by supporting domestic growth and the government
was ahead of the game, launching its economic security strategy last October at just the
right time.

He said the benefits were flowing through the economy now but more was to come.

"What we are doing right now is looking at all options, given the substantial deterioration
that has occurred during that period and the grim outlook that now comes out of bodies
like the IMF," he said.

Mr Swan said he had a strong preference for direct investment in nation-building infrastructure.

He said incentives for business investment were always important.

"But we must never forget that in this environment where there has been a collapse
in global demand, the most important thing for the government to do to stimulate the economy
is to stimulate demand so that business actually has some customers," he said.

AAP mb/nf

KEYWORD: ECONOMY SWAN 2 CANBERRA

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