Swan aims for Budget surplus 3 years early

Wayne Swan. Photo / Mark Mitchell

CANBERRA - Australian Treasurer Wayne Swan last night delivered on his promise to rein in spending and deliver a Budget short on election-year frills.

But with stronger than expected economic forecasts and carefully-targeted priorities, Swan revealed measures that will provide significant gains for business, industry and social programmes.

The measures embrace infrastructure programmes, large increases in health spending and skills development, a new focus on renewable energy, boosts for superannuation and savings, and tax cuts and reforms.

Business was promised lower GST compliance costs, capital gains tax reforms, and moves to help shift borrowing from banks to retail investors, and to improve banking competition by phasing down interest withholding tax on financial institutions.

"This is a Budget that produces an economic and fiscal position that is the envy of the developed world, and a stronger, more secure future for all Australians," Swan said.

The Budget was framed against Treasury forecasts warning that while the world economy was recovering, growth remained patchy and at risk.

Within Australia, a two-speed economy was developing as the non-mining sector found it harder to compete for skills and capital.

But forecasts predicted recovery in household consumption, strong growth in housing and business investment, falling unemployment and a narrowing current account deficit.

Real GDP growth is forecast at 3.25 per cent in 2010-11, and 4 per cent in 2011-12.

And at A$40.8 billion, the projected 2010-11 deficit is almost A$16 billion less than expected 12 months ago.

The Budget is forecast to return to surplus in 2015-16 - three years earlier than expected.

Central to the Government's strategy is its proposed 40 per cent mining "super-tax" to be introduced from July 1, 2012, although it remains under threat in the Senate.

Swan said the tax would help early-stage and less profitable resource projects and pay for a cut in company tax from 30 per cent to 28 per cent by 2014-15 - two years earlier for small businesses.

The super-tax will also fund a A$5.6 billion infrastructure fund and a skills programme that will create 70,000 new training places over the next four years.

The Government has also tried to sidestep its decision to shelve plans for an emissions trading scheme by setting up a renewable energy plan centring on a A$652 million fund to encourage private sector investment.

The Budget also added to its A$5.3 billion public hospital and primary care reform deal with the states with an extra A$2.2 billion to improve access to GPs, upgrade primary health care clinics, train more nurses and introduce an electronic health record system.

Workers will gain from the third and final round of tax cuts through higher tax-free thresholds, a phased lifting of employer superannuation contributions from 9 per cent to 12 per cent, simplified tax returns and a 50 per cent tax discount on interest of up to A$1000 on savings.


Looking Ahead

* Australia's real GDP growth is forecast to be 3.25 per cent in 2010-11, and 4 per cent in 2011-12.

* The projected 2010-11 deficit is A$40.8 billion, almost A$16 billion less than expected 12 months ago.

* The Budget is forecast to return to surplus in 2015-16 - three years earlier than expected.