Asian century key to Australian boom – Treasurer Wayne Swan

The China-led mining boom that will help wipe out Australia’s deficit within two years was the “first taste” of benefits set to flow from the “Asian century”, Treasurer Wayne Swan said yesterday.

Asia’s insatiable demand for Australian iron ore and coal has helped build an economy dubbed “the wonder from Down Under”, which avoided recession during the global slump and now looks able to return to surplus by 2012/2013.

Mr Swan said the changing global balance of power towards Asia presented Australia with opportunities at least equal to any the country has seen before.

“In many ways the mining boom is just the first taste for us of the huge shift in the world’s economic centre of gravity in Australia’s favour,” he said.

Mr Swan said as the numbers of middle class people in Asia swelled, “the implications for high-value knowledge economies like Australia stretch well beyond the mining boom”.

“As the emerging economies continue to develop, the growing cities which are now generating extraordinary demand for Australia’s energy and mineral resources will be populated by an increasingly wealthy and upwardly mobile middle class, with incomes and tastes to match,” he said.

“As we integrate more closely into this vast and swiftly expanding economic zone more and more of our services industries will acquire the character of export industries. That is where our future lies.”

Speaking after delivering Tuesday’s belt-tightening Budget, intended to spread the wealth from the resources boom around the nation, Mr Swan denied the government’s forecasts were too reliant on China’s economic health.

“It’s not solely dependent on growth in China, but it certainly acknowledges that the region of which China is part is a very important part of the growth of this country in the future,” he told ABC Radio.

“It’s the reason why we have the mining boom.”

The Budget papers reveal the government expects GDP growth of 2.25 per cent in 2010-11, with this jumping to four per cent in 2011-12 and 3.75 per cent the following year.

Unemployment, now at 4.9 per cent, will drop to 4.5 per cent by mid-2013.

But the ruling Labour government is aware the benefits of the boom have not been evenly distributed, with high unemployment in some areas, rising living costs and industries such as tourism and manufacturing suffering due to a surging Aussie dollar.

The government has pledged to aid the vulnerable – with assistance to help the long-term jobless get back to work and increased spending on mental health – but is wary of the potential impact of inflation.

Mr Swan said it was clear that revenue collections from the current mining boom were not those of booms past, in part because of the strength of the currency, which has sat at historic levels above the greenback since October.

The high dollar has hurt trade-exposed sectors, slashing tax revenues already depleted by the impact of massive summer floods and destructive Cyclone Yasi which flooded coal mines and destroyed crops in Queensland.

Critics said the budget was overly reliant on China and cast doubt on whether the government could overhaul a current deficit of some 49.4 billion Australian dollars (US$53.6 billion) as projected.

“This is a government that is much better at forecasting a surplus than delivering it,” opposition leader Tony Abbott said. “If it’s achieved, it will be made in China, not in Australia.”