The baby bonus will be axed and dodgy company practices targeted as part of Wayne Swan’s plan to pay for the Gillard Government’s education and disability reforms.
Unveiling his sixth and probably final Budget, the Treasurer outlined a series of cuts offset by big ticket spending items, many of which will not get underway for at least a year.
The Budget shows the depth of the Government’s revenue woes, with this year’s deficit expected to be $19.4 billion.
A year ago Mr Swan predicted a surplus of $1.5 billion The coming financial year is little better with a deficit forecast of $18 billion with shortfall of $10.9 billion tipped for 2014-15.
Not until 2015-16 does Mr Swan expect the Budget to be “in balance” before achieving a skinny $6.6 billion surplus in 2016-17.
Mr Swan blamed the deficits on revenue write downs since the last Budget of $12 billion in 2012-13 and another $15 billion in 2013-14, a result of the strong Australian dollar, falling commodity prices and the tough global economy.
He said delivering a surplus now would endanger the jobs of many Australians.
“We face a clear choice,” Mr Swan told Parliament. “Radical cuts to the bone that would risk jobs and our economy, or a sensible, calm and responsible approach that puts jobs first.
“Just because the global economy took an axe to our Budget, does not mean we should take an axe to our economy.”
The Budget outlines 10-year plans to put in place both the national disability insurance scheme, named DisabilityCare Australia, and the Gonski school reforms.
In their first four years, the school changes will cost $3 billion while the disability reforms will cost another $1.9 billion.
On top of those priorities, Mr Swan outlined an infrastructure splurge worth $24 billion, though only $3.1 billion of that will be spent over the next four years.
To make room for the spending, Mr Swan has had to make another round of cuts and tax increases.
The single largest increase was the previously flagged lift in the Medicare levy by 0.5 percentage points. That will raise more than $11.5 billion over the forward estimates.
But in a surprise move the Government has decided to ditch Peter Costello’s baby bonus.
Family Tax Benefit A will be lifted by $2000 for the first child and $1000 for subsequent children to compensate for the end of the baby bonus but it will still leave prospective parents out of pocket.
The baby bonus will be abolished from March 1, 2014.
Businesses that engage in various practices to minimise their tax will also be targeted.
Multinational firms that dump debt to their Australian outfits, banks that shift domestic profits to offshore entities and “dividend washing” by investors will all be in the gun.
The purchase of mining rights and information by firms will also be excluded from claiming exploration deductions.
That follows some cases, many on the East Coast, of large firms buying junior explorers at high prices and claiming that cost as tax deduction.
Following on from a recommendation from the Henry Tax Review, the net medical expense offset will be phased-out over the next six years.
And the Government will seek to recoup the cost of processing imported goods with a sizeable increase in the import processing charge.
The Government has committed to a range of WA infrastructure priorities, including $418 million for the Swan Valley bypass, $308 million for the Great Northern Highway between Muchea and Wubin and $174 million for the North West Coastal Highway from Minilya to Barradale.
There is $59 million to make Leach Highway a four lane divided road between Carrington Street and Stirling Highway and $140 million for three new grade separated intersections on Tonkin Highway at Benara Road, Morley Drive and Collier Road.
There is also $500 million over ten years for Perth public transport projects, which could include the MAX light rail and airport rail projects.
Further funding could be available subject to the Barnett Government developing more detailed business cases.