Monday, March 12, 2012

Tough budget. Is Swan having us on, or...

I tend to think he is dinkuum

The Australian budget looks healthier than we have been led to believe.

New finance department figures released late Friday confirm Treasurer Wayne Swan’s claim that tax revenue is falling behind. They show revenue of $180.9 billion in the first seven months of the financial year, around $3 billion less than expected.

But they also show government spending down, amounting to $211 billion - some $2 billion less than expected.

Grant and benefit payments, wages and salaries payments and spending on goods and services were all lower than expected.

The net impact on the budget of $1.1 billion is small in relation to the $370 billion total.

The finance department reports the running totals on a so-called underlying cash basis, adjusting for the effect of asset sales. Its raw figures, also published, show the budget $647 million ahead of what was expected at the end of January. The running deficit total is $26.025 billion rather than the expected $26.672 billion

Mr Swan said Wednesday this year’s budget would be “in some ways, the hardest of them all”. Company tax collections were “already down on what we had forecast, of that there is no doubt”.

He said he would need to find further savings in order to deliver the promised 2012-13 surplus.

But the finance department figures suggest spending is already being reigned in and only small further cuts might be needed...

The Treasurer said yesterday company profits had deteriorated since the results that fed the tax revenue reported for the seven months to January.

“The National Accounts showed company profits down 2.7 per cent in the December quarter,” he said. “This will inevitably flow through to the budget bottom line and obviously means we will have to find significant savings in the May Budget.”

The finance department points out that its cumulative totals may not give the full picture as revenues and expenditure vary from month to month.

Commonwealth Securities economist Craig James said the totals would nonetheless “comfort the bean counters that extra efforts aren’t required to achieve the budget forecast”.

“Given that budget forecasts and outcomes can miss by big margins, the current figures are encouraging,” he said.

The update contains bad news for the states.

Goods and services tax revenue - earmarked for the states - climbed just 2.9 per cent in the year to January, failing to match inflation.

Treasury secretary Martin Parkinson said last week both levels of government were likely to have “at best razor-thin” surpluses for years to come without deliberate efforts.

In today's Canberra Times, Sydney Morning Herald and Age

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