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Issue #1486      26 January 2011

Don’t let the floods’ reconstruction bill curtail other spending priorities

ACTU statement

The Federal Government should not deviate from its spending priorities and should reconsider its plans to return to Budget surplus in 2012-13, given the magnitude of the rebuilding cost from the floods, say unions.

ACTU President Ged Kearney said unions were concerned that an over-riding intention to get the Budget back into surplus early could result in cutbacks to services or delays in much-needed spending commitments.

Ms Kearney said that with estimates that the full economic cost of the floods could be $15-20 billion, there was no doubt the Budget would come under considerable pressure.

“Whatever the final cost, there is little doubt the impact of the floods on agriculture and industry will constrain GDP growth in the short run, but the injection of spending into the economy for the reconstruction may boost growth down the track,” she said.

“We acknowledge that the Federal Government has intended to return the Budget to surplus in 2012-13. However, in light of the impact of the floods, this target should now be reconsidered.

“Measured against any of the world’s developed economies, Australia’s deficit projection of 0.8 percent of GDP in 2011-12 is low. No other major economy is planning to return to surplus as early as Australia, and importantly, the deficit is not putting any strain on the private economy.

“Australians understand that a modest deficit is an entirely reasonable way of funding nation-building infrastructure. No Australian would begrudge the government extending the deficit when the funds are to be used for rebuilding flood affected parts of Queensland.

“But it would be detrimental to Australia’s long-term prosperity for the extra costs of the floods to result in a reprioritising of important government spending initiatives including investment in infrastructure, or cutbacks to recurrent expenditures on health, education and other services.

“We urge the government to show caution in offsetting government services against that priority, as well as funding the reconstruction effort following the floods.”

Australian unions and their members have donated more than half a million dollars to the Queensland Premier’s Flood Appeal. These contributions include $250,000 from the CFMEU Mining and Energy Division, and $100,000 from the Australian Workers’ Union.   

Next article – Editorial – Public, not-for-profit insurance needed

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