Slumping resource sector forces Australia to sell off state assets
The country's dependence on resources and mining has exposed it to revenue problems as those sectors hit a downswing
CANBERRA, Australia—Australian state governments that sell assets such as airports and utilities as part of a national policy to rekindle economic growth will get new tax arrangements to offset lost revenue, the federal treasurer said Wednesday.
Treasurer Joe Hockey wants to reinvest the money from asset sales into new national infrastructure that he hopes will fill the investment void left by the slowing mining industry. The government hopes sales of state companies will raise as much as 130 billion Australian dollars ($117 billion), but the policy would also result in some lost revenue for states by putting the businesses in private hands.
“We’ve got a very short timeframe to move in recycling of assets and the construction of new, productive assets,” Hockey told reporters.
“Australia is facing a significant drop in new investment in the mining and resources sector; accordingly, we need to stimulate other parts of the economy,” he said.
The country avoided recession during the global financial crisis thanks to a mining boom, but massive investment in new mines fueled by burgeoning Chinese demand for coal and iron ore has passed its peak.
Hockey said he was negotiating tax arrangements with states to offset the loss of revenue that would result from the sale of state-owned businesses.
“We are working with our state colleagues recognizing the fact that when assets are in state hands, currently the tax equivalent revenue goes to the states,” he said.
Details of the tax arrangements agreed with the states will likely me made public before Hockey reveals his conservative government’s first annual budget to Parliament on May 13.
The Australian budget is headed for an AU$47 billion deficit in the current fiscal year that ends June 30. Gross debt will peak at AU$667 billion, according to the latest government projections.