VIC: Asia blamed for cuts in budget forecast

AAP General News (Australia)
12-29-1998
VIC: Asia blamed for cuts in budget forecast

MELBOURNE, Dec 29 AAP - The impact of the the Asian economic crisis on Victoria was
revealed today in a budget review which scaled down growth forecasts.

"Although the Victorian economy has shown considerable resilience to date, the
deterioration in the global outlook is likely to see some slowing in economic growth over the
next 18 months," the 1998-99 Mid-year Budget Review says.

Released by Treasurer Alan Stockdale, the report said the state's budget remained on track,
with the state's operating surplus for 1998-99 revised down by $17.2 million, to $750.1
million.

But the medium-term budget outlook had "deteriorated moderately" since the April budget,
with the sustainable operating surplus now expected to average $660 million a year between
1999 and 2002, down from around $780 million.

Also revised down for the same period was the projected sustainable cash surplus - from an
average of almost $260 million a year to $200 million.

Mr Stockdale said the mid-year review showed the importance of prudent planning and that
the state had a $200 million a year buffer against future unforeseen circumstances.

"It has always been government policy to budget for a modest 'safety margin' to protect
against unforeseen events," he said in a statement.

Weaker growth in Asia and other economies, soft commodity prices, international financial
instability and the impact of the Longford gas explosion in September are all cited as reasons
for forecasts of reduced economic growth in Victoria.

Victoria's economic growth is now expected to be 2.5 per cent in 1998-99 (compared with
the April budget estimate of 2.75 per cent) and 2.25 per cent in 1999-2000 (compared with 2.75
per cent).

"The fact that Victoria can experience the Asian downturn, incidents such as the recent gas
emergency and maintain its budget surplus is an indication of the importance of such prudent
planning," Mr Stockdale said.

Employment growth has been revised up to 1.75 per cent in 1998-99, but is expected to only
be one per cent in 1999-2000.

This meant the state's unemployment could remain around the eight to 8.25 per cent range
over the next 18 months.

The economic slowdown and volatility in the sharemarket has led to an expectation of $15
million less revenue from payroll tax and $40.8 million less from stamp duties on mortgages
and marketable securities.

"These declines are expected to be partly offset by stronger than expected receipts from
gambling taxes ($31.1 million)," the report says.

AAP lmw/er/kr/br

KEYWORD: BUDGET VIC

1998 AAP Information Services Pty Limited (AAP) or its Licensors.