THE Prime Minister has stepped up his defence of a budget deficit as new figures suggest that Victoria is holding back the national economy.
The quarterly measure of business capital expenditure produced as an input into the calculation of Australia's Gross Domestic Product shows that Victoria held back the nation more than any other state.
Capital expenditure collapsed by 9 per cent in Victoria in the September Quarter, almost twice as much as it did in NSW. In every other state apart from Tasmania capital spending increased.
So big was Victoria's $391 million collapse that it half offset Western Australia's jump of $609 million.
Nationwide, capital investment increased a seasonally adjusted 0.6 per cent. Without the collapse in Victoria it would have jumped 2.2 per cent...
Victoria’s share of manufacturing investment stands at its lowest level on record.
Prime Minister Kevin Rudd used the gloomy figures in parliament to defend his embrace of a budget deficit, challenging the Opposition to openly oppose the measures that could bring it about.
"Those opposite need to answer these questions: Do they support the economic security strategy? Their formal position is yes, I believe. Does anyone oppose the economic security strategy over there? Does anyone oppose the car plan over there?" he asked.
"The government is prepared to take whatever further action is necessary to support growth, to support jobs, to support families. The question the house would like an answer to is, what is the alternative strategy?"
Declaring that the year ahead was going to be "very tough indeed" Mr Rudd said that his government stood ready to take decisive action if the global economic crisis got worse. By ruling out a budget deficit the Coalition appeared to oppose to such action.
Challenged about his election campaign claim that he was an economic conservative who believed in budget surpluses Mr Rudd referred to "the conservative government of Germany, the conservative government of Japan and the conservative govt of the United States who are running fiscal deficits of minus 4.6 per cent of GDP, minus 3.8 per cent of GDP, and Germany on the back of its most recent stiumuls package 0.8 per cent of GDP".
Rather than engage in a debate about solutions the Opposition was trying to point-score out of other people's pain.
Shadow Treasurer Julie Bishop said the Prime Minister was panicking and should hold his nerve and focus on Australia's strong underlying fundamentals.
In another development Assistant Treasurer Chris Bowen appeared to open the possibility of cutting the rate of the goods and services tax before issuing a qualifying statement saying that it was not an option.
"We are not in the business of ruling things in or out because we need to keep our budgetary options open,'' he told Fairfax radio. "But of course in Australia, as opposed to other countries, there's a different set of arrangements in place for the GST where the states would have to agree to it.''
He later issued a clarifying statement, declaring that "the government has a firm commitment that it will not be changing the base rate of the GST"
"That commitment will not be changing,'' it said.