Tuesday, May 11, 2010

Tonight's surplus surprise

Treasurer Wayne Swan will tonight announce a return to surplus years earlier than forecast and a lower run up in government debt in an attempt to blindside the Opposition which is campaigning on debt linking Australia to Greece.

As the European Union unveiled a $1 trillion plan to contain its spiraling debt crisis Shadow Treasurer Joe Hockey said if there was "one lesson you get out of Greece, it is that governments can’t continue to be on the debt train".

"The more you are beholden to the debt markets, the less control you have of your budget," he told reporters in Canberra. "It is as simple as that."

Asked whether the was likening Australia to Greece Mr Hockey said he was not, but there were "lessons everywhere".

"Do not go down the path of debt when the best place you can be is to run a surplus. The best thing we could do for national savings is to have surplus budgets"

Tonight Wayne Swan will announce a return to surplus as many as three years ahead of schedule... in 2012-13 or 2013-14, part funded in part by $12 billion from the proposed Resource Profits Super Tax.

The announcement will blunt Opposition criticism that Mr Swan "will never deliver a surplus budget" and also render irrelevant the Coalition's Debt Truck which toured Australia last year emblazoned with the words "$315 Billion - Australians are now paying the price for Labor's reckless spending".

The $200 billion net debt forecast last Budget was slashed to $153 billion in the November budget update and will be revised down further tonight.

Coalition Finance Spokesman Andrew Robb late yesterday conceded the figure will "almost certainly be revised down on budget night" but said it would be the "result of the Rudd Government grossly underestimating the recovery in tax receipts following the global financial crisis".

Strong commodity prices and much higher banking profits will boost forecast company tax receipts and rapidly rising house prices and climbing share prices boost capital gains receipts.

But the Treasurer has cautioned that neither will hit the Budget bottom line quickly because businesses and share traders will use up accumulated tax losses.

Early in the budget process Treasury officials believed a 2012-13 surplus was in reach, but later became less confident.

Mr Swan nominated health as the centerpiece of tonight's budget saying it will "put in place the biggest reforms to health and hospitals since Medicare’s introduction".

They are believed likely to include funding of $25,000 per general practitioner for a nurse in each surgery in an attempt to move patient care away hospitals.

Other likely measures include tax breaks for interest earned in bank accounts and simple "one-click" tax returns as recommended by the Henry Review.

Finance Minister Lindsay Tanner said the Budget would also include tax cuts, "not just the ones already legislated".

Swan's big night

What to look for

. Early return to surplus
. New resource tax from 2012-13
. 28% company tax rate from 2012-13
. Small business asset writeoffs
. 12% compulsory super by 2019
. $3.9 billion in personal tax cuts
. $7.4 billion health reform
. One-click tax returns
. Tax breaks for saving

Published in today's SMH and Age

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