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Australian opposition outlines budget savings; PM predicts comeback

Australian Prime Minister Kevin Rudd smiles during his speech at the Lowy Institute for International Policy as part of his election campaig
Australian Prime Minister Kevin Rudd smiles during his speech at the Lowy Institute for International Policy as part of his election campaig

By Rob Taylor

CANBERRA (Reuters) - Australia's conservative opposition, heavily favored in next month's election, outlined A$31 billion ($27.8 billion) in savings on Wednesday and promised to breathe new life into the economy by abolishing environment taxes polarizing voters.

But Prime Minister Kevin Rudd said the opposition planned big cuts to key services and predicted voters would return to his Labor Party in the final week of campaigning. Most polls give the opposition under Tony Abbott a 53 to 47 percent lead, enough to give them a sizeable majority in parliament.

Opposition finance spokesman Joe Hockey, who would become treasurer of the world's 12th biggest economy if the polls prove true, said the conservatives were determined to better Labor's spending record, seen as one of Rudd's biggest electoral weaknesses.

"After six years of Labor getting every single budget number wrong, enough is enough," Hockey told reporters. "The coalition is absolutely committed to living within its means."

Labor, he said, had presided over a "dysfunctional" budget after ousting the conservatives in 2007.

The opposition has long made the abolition of a "carbon" tax on pollution and a tax on mining company profits the cornerstone of its bid to drive Labor from office, blaming the carbon tax for pushing up the price of electricity and other services.

VOTERS CONCERNS OVER BUDGET CUTS, JOBS

But budget cuts and their impact on jobs amid a slowdown remain a major concern among many of the 14 million voters. An Australian National University survey found jobs and management of the A$1.5 trillion economy to be the most important issue.

Rudd told a campaign event that Abbott planned in secret to "cut, cut and cut" health and education programs, austerity measures that could hurt confidence and propel the country into its first recession for a generation.

"He is the master of the big cuts," the prime minister said.

He predicted Labor would make a big comeback despite the polls, as it did in the 1993 election.

"Mr Abbott thinks he's a shoo-in," Rudd said. "I think the Australian people don't like political leaders who arrogantly assume that they have their vote already in the bag."

Hockey, a former financial markets lawyer, went out of his way to say there would no cuts in social spending.

The conservatives, he said, would deliver a centerpiece promise of a A$9.8 billion paid parental leave scheme, paid for in part through abolition of business compensation associated with the carbon and mining taxes to be eliminated. A further A$5.2 billion would be saved by axing 12,000 government jobs.

As well, the opposition would keep savings adopted by Rudd in a pre-election budget statement that lowered growth forecasts to 2.5 pct from 2.75 pct this fiscal year, and forecast the jobless rate rising to 6.25 percent.

The one exception would be Labor's cuts to tax breaks for the automotive sector, still struggling to adjust to the Australian dollar's high levels in recent years and local costs which prompted a pullout this year by Ford, he said.

In response to the weakening economy, the Reserve Bank of Australia has cut its benchmark interest rate to a record low of 2.5 percent, while a A$33 billion drop in tax revenue saw a forecast budget deficit this fiscal year of $A30.1 billion, returning to a A$4.0 billion surplus by 2016-17.

Global demand for iron ore, coal and other natural resources supported the economy for most of the past decade, but falling commodity prices and slowing growth in China, the country's top export market, have rattled confidence.

Hockey said the conservatives would more quickly wind back net government debt, now expected to peak at 13 percent of GDP by 2014-15, or A$212 billion, up from the May forecast of A$191.6 billion, or 11.4 percent of GDP in 2014-15.

"This is the most important election in a generation," he said.

($1 = 1.1154 Australian dollars)

(Editing by James Grubel and Ron Popeski)

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