Australia has little fiscal room to cushion a downturn should the global economy retrench, said Stephen Walters of JPMorgan Chase & Co., the only economist to predict the nation’s first interest-rate increase in 2009.
And then there were three: Goldman Sachs Group Inc., JPMorgan Chase & Co. and Macquarie Group Ltd. are sticking to bets the Reserve Bank of Australia will resume lowering interest rates as others ditch their rate-cut calls.
Australia will cut spending on foreign aid, welfare and the public service and impose a tax on the highest paid as Prime Minister Tony Abbott uses his first budget to downsize government and set a path to surplus.
Treasurer Joe Hockey is aiming to spur A$125 billion ($117 billion) in infrastructure projects, support medical research and bolster the education export sector to aid Australia’s transition from mining-led growth.
JPMorgan Chase & Co. and Westpac Banking Corp. pushed back their forecasts for when Australia’s central bank will lower interest rates, with the strongest inflation in two years offsetting rising joblessness.
Twice as many civil servants than mining workers were hired in Australia’s 10-year resources boom, enlarging the bureaucracy and inflating public spending. Cutting back is now a priority for a government seeking budget savings.