The government will rely on higher taxes and a handful of high-profile spending cuts to chart a path to fiscal sustainability and provide funding for its totemic education and disability reforms in its 2013-14 budget.
Treasurer Wayne Swan has unveiled an $18 billion deficit for 2013-14, coming on top of a $19.4 billion deficit for this financial year, with no return to a substantial surplus until 2016-17.
The budget boasts an array of savings measures and tax rises, but apart from what is likely to be a controversial dumping of the baby bonus, the government’s “savings” again rely heavily on tax rises or closing tax loopholes rather than genuine hard cuts to spending.
The “savings” are designed to gather momentum toward the end of forward estimates rather than affect the economy straight away, reflecting Treasury’s more gloomy outlook for the economy over 2013-14. Echoing the expectations of the Reserve Bank, Treasury expects growth below trend, at 2.75%, with unemployment higher than previously forecast at 5.75% and inflation lower, at 2.25%. Terms of trade will be slightly softer (down 0.75%) but export growth will still outrun imports at 6.5%.
With this softer economy, there’ll only be $2.15 billion worth of cuts in 2013-14; that builds to nearly $10 billion in 2014-15, then $15.6 billion, then over $16 billion.
However, the nature of the “savings” is revealed in spending forecasts. This table shows predictions on spending across the forward estimates from last year’s budget, compared to this year’s:
|
2012 budget $b |
2013 budget $b |
|
| 2013-14 | 387.3 (23.7% of GDP) | 391.2 (24.5% of GDP) |
| 2014-15 | 404.9 (23.5%) | 409.1 (24.4% ) |
| 2015-16 | 427.3 (23.6) | 425 (24%) |
| 2016-17 | 443.8 (23.8%) |
That’s because the bulk of the “savings” are tax rises, with tax forecast to rise as a proportion of GDP a full 1 percentage point between now and 2016-17, driven by the NDIS levy, which is forecast to raise around $12 billion over four years, and a major crackdown on corporate tax avoidance forecast to generate $4.2 billion.
However, there’s a host of small savings initiative spread through the budget papers, right down to forcing public servants into smaller workstations in order to save rental costs.
At the same time, the Treasurer has tried to make a virtue of the government’s low tax to GDP ratio, insisting the budget would be in healthy surplus if he were taxing at the levels bequeathed him by John Howard and Peter Costello.
If this is Labor’s final budget, it will mark Wayne Swan’s Treasurership as a period in which, together with the RBA, the government got the big calls right and took some significant steps toward a more sustainable fiscal policy, but in the end lacked the political capital, or courage, to really address the budget’s long-term needs — even when falling tax revenue demanded it.
Sure Bernard. Like to see you under the hammer with the reptiles of press pack, baying for blood!, all they were interested in was are you conceding the need for any election and are you handing over to the coalition tomorrow, would be soon enough.
I think it is about as much of a complacency shake the entitled could take in one hit, and is long term financial planning and that has ended the election is coming put your handout, stuff the future welfare of ALL Australians.
Me, I would have used the, crack a walnut with a sledge hammer approach. I would have made the Internationals bleed, real blood NO more privatise the profits socialise the losses, but it is a start. The internationals ain’t going anywhere. Miners of Aus resources in particular as the political stability of a number of other countries where these resources are is it a non viable option. All the G20’s have been in depth re off-shoring profits while claiming losses in country of profit origins. Personally if they want to play hardball do an HUGO (Chavez). No problem! Usually the “rent seekers” Particularly the resource sector are not the end user of said resource.
Why do you insist on always talking about this governments policy work in a totally political context? You’re always saying wtte “Yeah, they’re doing the right thing but they just can’t sell it, so what does it matter?”.
In fact, the times you’re genuinely attacking the government’s policies (on privacy, for example) are a bit of a relief. At least then you’re not talking about perceptions rather than the actual realities.
himi
I am with you GF50, all of the usual suspects have complained that it was a bad budget, most supporters of the LNP (business council, employer groups et al). Listening to the radio today any comments on the removal of the baby bonus were positive; it was a rort to buy votes amongst LNP supporters (and probably some who have the vote and don’t know what to do with it as long as they have their booze, new TV and ciggy’s).
I agree, let the rent seekers pay for once. They can leave the country but cannot take the resources. After all, the taxpayer will be paying for their environmental destruction long after they leave, particularly the pending CSG disasters in the easttern states. Where will their investment be when the groundwater is stuffed, certainly not here to help clean the mess.