Australia should do more to raise revenue instead of cutting expenditure

THE Australian prime minister's "near death" experience (in his own words), when his leadership of his party was under threat, seems to have concentrated his mind about the ailing economy. Tony Abbott's next Budget, due in May, could be pivotal in setting the country's growth pace.

Australia's economy was already showing signs of distress when the country's central bank cut the official cash rate to 2.25 per cent earlier this month, citing rising unemployment, below average consumption and low investment in the non-mining sector. The January jobless number stands at 6.4 per cent, the economy's worst showing since 2002. Prices for the mainstays of the export sector for the past 15 years - iron ore, thermal coal and coking coal - are going down sharply. The 50 per cent plunge in the past 12 months in the global price of Australia's most valuable export commodity, iron ore, has forced miners to cut back on investment.

And while the Australian dollar has dropped against the US dollar by 16 per cent, it slipped only 7.2 per cent on a trade-weighted basis. This means that the Australian currency remains relatively strong against her trade partners, making it hard for exporters of local manufactures to compete in world markets.