13/05/2014 Asia Business Report

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Led by Prime Minister Tony Abbott, Australia's government gets set to

hand down what could be one of the nation's toughest budget in years.

`` budgets. Investors react as India wraps up its five weeks of voting.

Thank you for joining us. How big of a budget problem does Australia

have? We will find out today when the government details its first

budget since coming to power late last year. With warnings of a crisis

within the nation's finances, Australians are being told they will

all have to do the heavy lifting to balance the books. While the local

economy is picking up speed, locals are bracing themselves for higher

taxes for the rich as well as cuts to welfare and government jobs.

Australia managed to chart a safe path through the choppy waters of

the global recession, thanks to a mining boom. But the government

believes that this lifestyle superpower must endure budget pain

to guarantee future prosperity. The budget is something that does

need to come down, does need to have some tough measures in it. But I

don't think we are as poorly off as people might think we are.

I think it will be tough and hit a lot of people who don't want to be

hit hard. I think it will be brutal and will

hit the middle range. Tax hikes for the rich, cuts to

welfare and the raising of the retirement age to 70 are expected to

be included in its latest economic blueprint.

Economists believe that with a deficit of about 3% of GDP,

Australia's financial woes are modest compared with the US and

Europe. It is right to say Australia has a

budget problem. We have had the biggest boom in our history. We

should be running budget surpluses now, not deficits. There is a

problem there but we don't have the sort of emergency that we have had

over the last years. Australia does have significant

challenges. Although unemployment here is low by international

standards, at less than 6%, it is expected to rise. And a decade`long

mining boom is fading. But economic growth is steady and the weakening

currency is helping exporters. So in many ways, Australia remains the

lucky country. But academics warn that an overly

tough budget could harm the economy. In the medium to long` term, there

could be some issues. The resources boom is over, suggesting the good

times are over too. There are fundamentally good aspects in the

economy and it is a question of sensible stewardship rather than the

sort of panic attack we are seeing at the moment.

The sand and the surf are part of Australia's famous no`worries

lifestyle but the government believes this fun`loving nation is

living beyond its means and warns that all Australians will have to

share the pain to help balance the books.

And the budget will be released this evening in Canberra. We will bring

you updates and reactions on tomorrow's bulletin right here on

Asia Business Report. One of the key drivers of

Australia's economy is China's demand for its resources, with

exports highly sensitive to Beijing's slower growth. While the

mainland's economic engine has lost momentum, it is not necessarily bad

news. I spoke to Mark Williams from Capital Economics, who explained why

China slowdown is not something to worry about. `` China's. It is

certainly true that the economy is slowing and there has been a sense

of panic in some waters of the market, which is massively overdone.

You have to remember that the Chinese growth rate has halved since

2007, down from 14% to 7% in the past few years. The fact that it is

slowing a bit more should not be because of massive concern. If

anything, the slowdown we are seeing is positive. It means some of the

imbalances in the Chinese economy are eroding. We should not be too

worried about it, but where do we see the risks in this slowdown? Is

it bad debt? Labour disputes? The focus of concern shifts every few

months but the area we should really focus on is property because it has

massive oversupply at the moment. And also, it's big enough that if

something goes wrong there, it will have widespread repercussions not

just in China but around the world. And where is this most being felt in

Asia? It's the commodity producers who are most exposed to the sort of

slowdown we are seeing at the moment. If the property sector goes

down, that will hurt copper, steel and iron ore producers and so on.

But at the same time, if the government can work more on consumer

demand through spending, producers of consumer goods, of which there

are many in this part of the world, should stand to do well. In a few

hours, China will unveil its latest retail figures as well as numbers

for industrial production, giving us an insight into how Chinese

consumers are behaving as well as providing an indication of how the

country's manufacturers are doing so far this year. In other business

news, Britain's biggest satellite television company BSkyB has

confirmed its interest in buying its sister companies in Germany and

Italy. The UK broadcasting giant said the move would have the

potential to create a world`class multinational pay TV group. Rupert

Murdoch owns almost 40% of BSkyB. Several former Barclays executives

will be questioned by fraud investigators over a deal with

Qatari investors in 2008. They include the former chief executive,

Robert Diamond. The Royal Bank of Scotland has announced plans for a

public share sale later this year of part of its US affiliate, Citizens

Bank. It is expected to raise over 100 million US dollars. After buying

citizens bank in 1988, RBS turned it into one of the biggest regional

banks in the US. But since being bailed out by the UK government in

2008, RBS has been under pressure to sell some of its foreign buildings.

Shares in Sharp have risen by more than 4% in Tokyo trading after the

firm reported its first annual profit in several years, following a

huge restructuring move. Japan's electronics giant reported a net

income of $140 million for the 12 months to March, more than double

its own forecast. Sharp is the largest maker of LCD screens, which

are used in televisions and smartphones. The Indian stock market

is about to open, giving investors a chance to react to the early exit

polls released last night after the country concluded voting in its

five`week long election process. Experts are predicting the BJP under

the leadership of Narendra Modi, will form the next government. This

is the Bombay stock exchange, located in the heart of India's

financial capital. It is perhaps the best indicator as to how investors

are feeling, and in the past few months, the only way has been up.

Time after time, the market has seen new record highs. Foreign investors

have put more than $5 billion into Indian companies in the last five

months and it is a frenzied driven by growing opinion that India is set

for a change in government. The polls have placed the coalition

headed by the BJP as the frontrunner to the next government. The people,

the markets, what a government led by Narendra Modi. They also vote

that he can do it without the support of his coalition partners

and can do it alone, with a clean sweep. That would lead to a great

deal of stability as far as policy is concerned. They won't have to

dance to the tune of coalition partners. Many are expecting sharp

rises when trading against on Tuesday, but some are arguing

caution. The opinion polls have been absolutely wrong during the previous

two elections, and that has left many investors worried, fearing that

the stock markets could fall dramatically if the final result due

on Friday turned out to be different from what the polls have been

predicting. But whatever happens today, the long`term mood of

investors both from home and abroad will be determined not by what

people are predict it will happen but by who takes power when the

results are in. Now, taking a look at the stock markets at the moment.

They are in positive territory after gains in the US technology and

biotechnology sector. Thank you for investing your time with us on Asia

Business Report. Goodbye. This is BBC News. The headlines: The United

States has revealed it is flying manned surveillance missions over

Nigeria to help