Budget aims to cut Australian unemployment

IN AN attempt to cut Australia's high unemployment before the next election, Paul Keating's Labor government yesterday introduced a budget focused on big increases in public spending aimed at creating jobs.

It was the Labor government's 10th budget, and the first to be presented by John Dawkins since he took over as Treasurer, or Chancellor, the job Mr Keating held for eight years.

Departing from the tight measures of fiscal restraint and budgetary surplus that marked Mr Keating's budgets of the 1980s, the budget forecast a deficit of Adollars 13.4bn ( pounds 5bn), or 3.3 per cent of gross domestic product. It is based on a projected growth rate for the Australian economy this year of 3 per cent, well down on the 4.75 per cent Mr Keating forecast last February.

The centrepiece was a plan to spend Adollars 742m towards providing jobs and training for Australia's swelling ranks of unemployed, now 11 per cent of the workforce. Mr Dawkins also announced increased spending on public hospitals and housing.

Unemployment has soared beyond all government forecasts, leaving Mr Keating with little chance of bringing it below double figures before the next election, due within a year. Most predictions are that it will remain above 10 per cent well into next year.

To pay for its big spending proposals, the budget's main revenue raising will come from increased taxes on tobacco, extending fringe benefits tax and raising the levy on income charged to fund Medicare, the national health insurance scheme.

The government will also rely this year on further public asset sales, in particular the selling of Australian Airlines, the domestic airline, to Qantas, the international carrier, and the eventual sale of the merged airline.

Australia has just begun to struggle out of recession, with annual economic growth running at 1.6 per cent. A near collapse of the Australian dollar last week was a signal of nervousness in financial markets over the government's economic strategy.

The intitial reaction from the business world was not reassuring. The Confederation of Australian Industry described its effect as 'depressing rather than expansionary', and said the budget lacked prospects for growth in private sector investment.

John Hewson, leader of the conservative Liberal Party opposition, described it as 'a blatant and irresponsible attempt to buy the government's way back into office with money it doesn't have'.