The 1990 Federal Budget: Lower Deficit

In 1990, the federal government will continue its course of fiscal consolidation. The deficit in the budget proposal for 1990 is projected to decline from AS 65 billion in 1989 to AS 63 billion in 1990. The cyclical impact of the 1990 budget is likely to be slightly restrictive. Government purchases from the private sector as well as transfer payments to private households will be curtailed in real terms. Moreover, progressive personal income taxes will dampen the increase in disposable income. In the medium term, the 1990 budget is fraught with problems. In some areas expenditure cuts have reached the limit, in other areas spending has not yet been brought under control.