Collect information and review material from the media about the details of the Budget. Also investigate the likely impact of this Budget on the Australian economy for the next financial year and beyond.
Australia¡¦s Budget 2003-04 has started on 1st July 2003 effectively. It is broadly divided into a number of categories.
¡P Economic outlook
¡P Fiscal outlook
¡P Personal income tax
¡P Defence
¡P Education
¡P Health service
¡P The disadvantage
¡P Research and development
¡P Support for rural and regional Australia
¡P Energy reform for the future
Economic outlook
¡P The Australian economy is expected to enjoy solid growth despite the global economy is slowing down, in particular the US economy.
¡P Growth in 2003-04 is forecast to be solid at 3.25%
¡P A moderate inflation of 2.25%
¡P The unemployment rate should be steady at around 6%
Effect on economy
As of 3rd July 2003, US has cut their interest rate and it is expected that Australia may follow suit. With a low interest rate environment, businesses and homebuyers can continue to access to cheap finance. Therefore business should experience a solid growth. The continuing expansion of property market has a significant contribution to the strong economy of Australia and in the future years to come.
Property boom has occurred widely in Australia, although Reserve Bank has warned several times to property buyers of a bubble burst, the warnings has not been realised and the property market remains solid. There is some evidence that Melbourne apartment price started dropping due to oversupply.
Treasury¡¦s comments
The Treasury predicts rising house values, low interest rates and a tax cut should keep consumers shopping and the economy growing despite the grim international outlook.
On the downside, the Treasury warns there are considerable risks that could leave the economy weaker than expected.
Troubles on the Korean peninsula, and the spread of severe acute respiratory syndrome, have compounded the problems of weak growth in the US and Europe, the vulnerability of banks and insurance companies in Japan and Europe, excessive home prices in some countries and the dangers of deflation.
While the end of the Iraq conflict has cut international oil prices, Treasury warns: "The full impact of the high price of oil over recent months has not yet been seen."
For Australia, the risks are not as great, but Treasury warns the drought may continue and inflation may drift higher, which will mean interest rates rising from the official rate of 4.75 per cent. The outlook presumes interest rates will remain relatively low.
Exports are predicted to grow at 6 per cent but the exchange rate is assumed to stay at an average of US60c, 5c below this week's high.
With the weakening of US dollar and increase in strength of Australian dollars, it will reduce the competitiveness of Australian exports.
"Consumption remains robust, but any sustained deterioration in sentiment or a protracted period of slower growth in income or wealth could cause spending growth to slow as households [next page]