Wednesday, October 17, 2012

MYEFO Monday, Cigs up November 1

University research grants in doubt

The government will release its midyear budget update next week, prompting accusations it is bringing the document forward to avoid factoring in worsening revenue predictions and jeopardising its promised surplus for this financial year.

It is understood that the midyear economic and fiscal outlook will be released as early as Monday, more than a month earlier than last year's release on November 29.

The Reserve Bank minutes published yesterday contributed to the downbeat assessment of the economic outlook, a scenario that paves the way for interest rate cuts in coming months.

The government has promised to return the budget to surplus this financial year but is having to make more cuts because the economic outlook has worsened since the budget in May and the cost of dealing with asylum seekers has blown out.

The Herald understands university research grants worth $240 million are at risk after the government put on hold this year's grants round amid speculation it would not be restarted.

So-called discovery grants in fields including science, economics and medicine are normally announced in late October. Informally, academics have been told not to expect announcements this year and that next year's round is also on hold.

Yesterday, in Senate estimates hearings, George Savvides, the managing director of Medibank Private, the government-owned health insurer, confirmed it was set to hand the government a $300 million special dividend, which would be the second such payment in three years...

Other areas that have been subject to speculation concerning savings include superannuation and a 25 per cent increase in tobacco taxes.

The government, which faces an election next year, is sticking to its surplus promise despite falling revenues, declining commodity prices and an uncertain global outlook.

The budget predicted a slender surplus of $1.5 billion for this financial year. Last financial year it recorded a deficit of $47 billion.

The opposition spokesman on finance, Andrew Robb, said that releasing the midyear statement early would avoid the forecasts being based on assumptions more downbeat than they are at present.

''Releasing it this early will be a cynical snow job to disguise the anticipated haemorrhaging of tax revenue resulting from softening commodity prices and terms of trade,'' he said. ''They've brought it so far forward it's meaningless.''

He pointed to the Reserve Bank minutes, which noted that despite a small recovery in commodity prices, mining investment was likely to peak earlier and at lower levels than had been forecast.

The government would not comment on when the midyear budget update would be released but one source was keen to dispute the claims that a release next week would be unusually early, saying previous midyear forecasts - in 2008, 2009 and 2010 - were released in early November.

In today's Sydney Morning Herald and Age

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