5 Things Things to Know About Australia's New Budget

Australia’s conservative government unveiled a budget that favors growth over a promised return to surplus–setting the battleground for a tighter-than-expected July general election–against the backdrop of an economy struggling to deal with the end of a long resources boom. Here are five things to know:

#1: The Economy

The government lowered its forecast for economic growth for fiscal 2017, highlighting deepening concerns about the global economic outlook, especially China. The government’s new forecast for GDP growth was 2.5%, down from 2.75% at its December budget review. The government also lowered its forecast for unemployment by mid-2017 to 5.5% from 6.0%, reflecting recent unexpected improvements in the job market.

#2: Iron Ore Prices Remain Solid

Prices for Australia’s chief export, iron ore, were forecast to average US$55 a metric ton, against a December expectation of US$39. Still, the government is conscious of risks still hanging over iron-ore markets, with global supply booming and demand from key ports such as China uncertain. “The outlook for the price or iron ore is subject to considerable risk,” the government said.

#3: Infrastructure Spending Spree

The deep downturn in prices of several of Australia’s commodity exports has prompted the center-right government to bet 50 billion Australian dollars (US$38.34 billion) on infrastructure to bolster the economy. If elected to another three-year term, the government said it would invest heavily in new rail, dam, road and port projects over five years. Planned projects include an inland rail line spanning more than 1,000 miles to connect the cities of Brisbane and Melbourne.

#4: Targeting Multinational Tax

The government will close tax loopholes for multinational companies, with a local version of the U.K.’s so-called Google Tax raising A$3.9 billion to fund broader corporate tax cuts. Public anger with aggressive tax minimization plans has been rising in Australian and internationally. The diverted profits tax will target multinational companies that attempt to shift profits offshore with a 40% penalty rate, larger than the 30% corporate tax rate.

#5: Ships and Steel

The government promised a A$90 billion pipeline of naval shipbuilding projects to stem the loss of manufacturing jobs in South Australia state, as well as in Western Australia. That will see 12 new French-designed submarines built, along with nine new frigates, small patrol boats and 12 larger offshore patrol vessels. Mr. Morrison said the program would lead to 3,000 jobs and fuel growth, as well as lift defense capability. The projects will also use Australian steel to aid the struggling steel industry.