Monday, April 30, 2012

Confirmed. What Swan needs to find to promise a surplus

Treasurer Wayne Swan has put a number on the savings he’ll need to outline Tuesday week to return the budget to surplus.

Appearing on Meet The Press Mr Swan said a collapse in projected budget revenue of $5 billion in 2012-13 and another $5 billion in 2013-14 would mean he would need to find a an extra $10 billion over the next two years.

The Age understands that only $2 billion of the $5 billion shortfall is due to weaker than expected company tax collections. Another $1 billion is due to weak collections from superannuation funds in the wake of a downturn in the share market. A further $750 million is due to weaker than expected collections of customs and excise duties on alcohol, tobacco and fuel.

Mr Swan said he would do everything within his power “to protect low and middle-income earners”, confirming that high earners on $300,000 or more would have their superannuation contributions taxed at 30 per cent rather than the present highly-concessional 15 per cent.

“We have got to make sure superannuation concessions are distributed fairly around the system and in a budget where we are looking for savings, it’s important to run your ruler over a whole range of tax expenditures to make sure that they are directed in the right areas,” he said.

Mr Swan will also tighten up further on so-called living away from home allowances under which executives hired from overseas or interstate receive large tax-free sums to compensate them for “living away from home”...

From July 1 they will have to have to prove they rent or own a second home to claim such an allowance and it will be limited to a period of one year. Fly-in fly-out workers in the mining industry will be allowed to continue to claim the allowance.

Four leading public health bodies have written to the prime minister asking for a crackdown on alcohol tax concessions as a way of stemming the tide of alcohol-related deaths and injuries and saving $1.5 billion per year.

The Australian Medical Association, the Cancer Council, the McCusker Centre for Alcohol and Youth and the Foundation for Alcohol Research and Education say taxing wine by volume at the rate applying to beer would save more than $1.5 billion and would stop the leakage of concessions to New Zealand wine makers now claiming them as part of the Closer Economic Relations agreement.

“We are aware that the Government has previously declined to act in this area, arguing that it will not act in the middle of a wine glut and where there is an industry restructure underway,” the letter says. “However research shows the current alcohol taxation arrangements actually contribute to the increased availability of very cheap wine and action is urgently required.”

The budget numbers will be boosted by a forecast of a return to economic growth of 3.25 per cent. The latest figures show growth languishing at 2.3 per cent.

Businesses taking part in the Treasury’s liason program report “strong demand” in the resources sector, a “challenging” environment in the retail sector and “difficult” conditions in manufacturing, according to a Treasury document released this morning.

The Reserve Bank will cut official interest rates by an expected 0.25 points after its board meeting Tuesday in response to weak economic growth and weak inflation. Mr Swan said the budget surplus to be unveiled Tuesday week would give the Bank “maximum flexibility” to do more in future months.

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

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