Asia boom US bust buffeting Australian economy
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Asia's Boom and US Downturn Impacting Australia's Economy
Summary:
Australian Prime Minister Kevin Rudd warned that the combination of Asia's economic boom and the United States' downturn is affecting Australia's economy. He announced measures to control inflation.
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Article:
Australia is currently navigating a challenging economic landscape, influenced by Asia's rapid growth and the United States' economic slowdown, warned Prime Minister Kevin Rudd. Speaking on Monday, Rudd laid out a strategy to combat inflation as part of his first major economic address since his Labor party took office, defeating John Howard's conservatives.
Rudd committed to significantly reducing government expenditure to achieve a projected budget surplus of 1.5% of the gross domestic product by June 2009?"amounting to about 18 billion AUD (15.8 billion USD). This plan coincides with the government's promise to deliver 31 billion AUD in tax cuts.
Addressing business leaders in Perth, Rudd highlighted the "conflicting economic currents" Australia is facing. These include a slowdown in the US-led global economy, a trading boom fueled by Asia-Pacific countries, and domestic inflationary pressures.
He criticized the previous government for allowing these pressures to intensify and proposed a five-point plan focused on incentivizing private savings, addressing skills shortages, and mitigating infrastructure bottlenecks.
Rudd, who campaigned as a fiscal conservative, emphasized the need for fiscal discipline to achieve the budget surplus, exceeding the previous government's target. He pledged to eliminate wasteful spending through a rigorous approach.
Inflation is anticipated to surpass the Reserve Bank of Australia's target of 2-3% this year, potentially prompting further interest rate hikes by the central bank. Interest rates have already reached an 11-year high of 6.75% following two increases last year, a factor believed to have influenced the defeat of the past government.
Rudd pointed out that the economic downturn in the US, Europe, and Japan contrasts with robust growth in the Asia-Pacific region, which is driving demand for Australia's resources. "In the coming years, developments in China will increasingly influence global and Australian economic conditions," he stated.
India's economy is also rapidly expanding, becoming a key export market for Australia. Together, China and India accounted for approximately 40% of Australia's export growth in 2006-07.
Rudd stressed the critical need for prudent management of the domestic economy in light of regional expansion, with inflation being the most pressing challenge.
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