We expect to see a deterioration in the outlook for Australia’s fiscal balances under the new government, given the Liberal-National coalition’s enthusiasm to go ahead with proposed infrastructure plans, despite increasing signs of a pick-up in the economy. Indeed, Treasurer Joe Hockey’s recent proposal to account separately for debt used to fund infrastructure further points to the coalition’s declining keenness to pursue fiscal discipline. Given the lack of structural reforms on the cards, we have downgraded our outlook for the country’s fiscal accounts, expecting the deficit for fiscal year 2014/15 (July-June) to widen to 1.9% of GDP, versus our previous …
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