A lack of confidence is not commonly associated with Australians. In that particular trait, they usually leave New Zealanders trailing in their wake. Not at the moment, however. The two countries' Budgets, one delivered last week in Canberra and that to be unveiled on Thursday in Wellington, speak volumes of the strength of their respective economies and their citizens' state of mind.
Treasurer Joe Hockey's was all about setting conditions for optimism and growth in Australia. Finance Minister Bill English has the far easier task of addressing a nation where consumer confidence remains high, even if that of business has begun to drift. The reasons are readily apparent. The Australian Budget charted a lower-than-expected $35.1 billion deficit for 2015-16 and a return to surplus no sooner than the end of the decade. In this country, the Government's failure to meet its target of a first surplus since 2008 in the current year seems small beer by comparison.
In such circumstances, it would be expected that the Australian Budget would be the more eye-catching. Mr Hockey did not disappoint. The centrepiece was a set of major concessions to small businesses. Those with turnovers under $2 million will get a tax cut and until mid-2017 can instantly deduct up to $20,000 for every purchase of equipment. In effect, Mr Hockey has placed responsibility for economic growth and export dynamism on small business. It has been given every reason to invest and take on more staff.
An economy can be well served by this type of encouragement. In Australia's case, it has become essential. Mining exports, the pillar of its economic strength for so long, continue to struggle. Low prices are likely to endure until China takes greater quantities of iron ore. That situation makes some of the Australian Treasury's forecasts for economic growth seem fairly heroic. It predicts non-mining investment will propel growth from a current 2.5 per cent to 3.25 per cent in 2016-17 and 3.5 per cent thereafter. The projected deficits will become much worse if these forecasts - described as "rosy" by one leading economist - are not met.
Mr Hockey's Budget is much different from his first. Gone are draconian spending cuts. In that respect, given the travails of the Abbott Government, it is also a very political document. Mr English is under no such pressures. The failure to achieve a surplus may be an embarrassment but the Finance Minister has already said it will not prompt cuts in services and income support, or affect the $1 billion in new spending in this Budget and the next.
