Budget “austerity” needs to be cushioned - Smith
(2 May 2013 – Australia) A cut in spending and lower taxes should strengthen the budget instead of a tax hike, ANZ Chief Executive Mike Smith believes.
Prime Minister Julia Gillard revealed earlier this week that weaker tax receipts had blown a A$12 billion hole in this year’s budget.
Smith argued on Tuesday that any budget "austerity" should be cushioned with other measures to increase activity; he said he was not telling Treasurer Wayne Swan how to do his job, but argued against tax rises.
Instead Smith suggested lower taxes would boost sagging levels of economic growth.
''You've always got to have a mix of looking at the income and the cost side, but tax increases generally do not create economic growth. They have a restraining or indeed a contracting effect on the economy,'' Mr Smith said.
''If I was him [Swan] I'd be looking to reduce taxes. Certainly costs are an issue and costs have to be looked at."
''The best way to get the economy going is to stimulate economic activity, and the best way to do that for business is to reduce tax, because people then will invest.''
''With austerity, it's best to have some sort of stimulus as well. I think austerity on its own is incredibly difficult to deal with, stimulus on its own can run away, and often you need a balance.''
He made the comments after ANZ said its half-year profits had risen 10 percent compared with a year earlier, to A$3.18 billion.
Despite the increase, which was helped by a fall in bad debts, Mr Smith said the outlook for Australia's economy was subdued because of the impact of the high dollar and consumer caution.
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