Australia may sell assets and cut welfare spending to rein in a debt burden that is already the second-smallest among developed nations, bolstering a bond market that is off to its best start since 2000.
Australian Treasurer Joe Hockey will deliver his first budget on May 13. A five-kilogram (11-pound) tome published yesterday by the National Commission of Audit recommended savings of as much as A$70 billion ($65 billion) a year within a decade. The independent body, led by former Business Council of Australia President Tony Shepherd, wants the government to commit to achieving surpluses over the economic cycle.
Hockey faces an estimated A$123 billion shortfall for the four years through June 2017. Austerity measures may pressure an economy struggling as the resources boom fades. Benchmark 10-year yields fell 29 basis points in the first four months of 2014, the most since a 57 basis point drop in 2000. The Reserve Bank of Australia has cited expectations that fiscal tightening will weigh on growth as it holds its cash rate target at a record low.
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