Swan wields axe to protect shrinking surplus

Updated

Sorry, this video has expired Video: Swan makes cuts to defend budget surplus (7pm TV News ACT)

Treasurer Wayne Swan has revealed cuts to baby bonus payments and the private health insurance rebate to protect his promised budget surplus, prompting Opposition claims the changes will hurt families.

Today's mid-year economic update shows lower commodity prices and falling tax receipts have trimmed the projected 2012-13 budget surplus to just $1.1 billion, down from the $1.5 billion predicted in May.

There has also been a further write down in tax revenue over the forward estimates of almost $22 billion, including $4 billion in the current financial year.

As a result, Mr Swan has revealed spending cuts and extra charges worth $16 billion over four years, including:

Limiting increases in the private health insurance rebate to inflation, saving $710 million over four years.

A jump in visa application fees, forecast to raise $520 million over four years.

The baby bonus payment for the second and subsequent children will be reduced to $3,000, saving $505 million over forward estimates.

Delaying funds for Labor's trades training centres program, saving $305 million.

Saving $513 million by shutting down the Medicare teen dental program

Mr Swan says the savings measures will help return the budget to surplus, which in turn will give the Reserve Bank more room to cut interest rates.

"We haven't taken any of the savings that we've made today lightly, but we've made sure that they don't hurt the economy or don't hurt the most vulnerable," Mr Swan told reporters in Canberra.

One of the biggest revenue measures announced in the budget update is a change in how regularly companies pay tax, which is expected to raise $8.3 billion.

Baby bonus cut

From the middle of next year, the baby bonus payment for the second and subsequent children will be reduced from $5,000 to $3,000.

Mr Swan says the payment has been reduced because there are many items, such as a cot or a pram, that do not need to be repurchased for a second child.

"We believe that these changes to the baby bonus will bring in more into line with actual costs of having children," he said.

MYEFO figures at a glance $16.4b in savings and extra charges

2012-13 surplus now projected to be $1.1b, down from $1.5b in May's budget

Surplus projected to hit $2.2b in 2013-14

GDP forecast to grow 3% in 2012-13

Demand for raw materials such as coal, iron ore is falling

Unemployment steady between budget forecast and MYEFO at 5.5%

Baby bonus cut to $3,000 after first child

"Many people will see this as a tough decision, I understand that," he said.

"But in the suite of support that we provide to families... all of those things indicate that we are very strong supporters of providing assistance to families."

The Coalition has seized on the decision, arguing the move will put extra pressure on already stretched households budgets, although it has not said yet whether it will oppose the move.

"Wayne Swan is hurting families' budgets so he can patch up the Government's budget," Opposition Leader Tony Abbott told reporters in Canberra.

"There are cuts to education, there are cuts to health, there are cuts to the baby bonus, there are cuts to superannuation.

"Families are suffering so that the Government can look better."

The Government has also decided to scale back the private health insurance rebate, by linking its growth to the rate of inflation in instances when premiums are increasing faster.

In effect, it will mean the rebate will not keep pace with the rising cost of private health insurance.

Mr Swan says the move will make government spending in the area more "sustainable", saving $700 million from early 2014.

The Greens have attacked the budget update, arguing that any surplus will be achieved on the back of the most vulnerable people in the community.

"The Government has not made any provision to increase the NewStart allowance by $50 a week, which everybody recognises is necessary," Greens leader Christine Milne said in Canberra.

"So you have a whole lot of people out there, who are desperately trying to seek work (and) who are being driven further into poverty, and we're told by Wayne Swan that he is actually doing this without hurting the most vulnerable.

"Well, he's not."

Sorry, this video has expired Video: Swan makes cuts to protect shrinking surplus (ABC News)

The economic update does not provide any detail of how much it is costing to re-establish immigration detention centres on Manus Island or Nauru. It says contracts are still subject to commercial negotiations.

However, it reveals a $1.1 billion blowout in the cost of dealing with the rising number of asylum seekers arriving by boat.

"The blow out is not surprising given the fact that this year more people are illegally entering Australia on boats every week than the Government estimated would turn up every month," Opposition Immigration spokesman Scott Morrison said.

"Labor should now disclose what their new estimate of arrivals is, so we can judge just how the big the next blowout will be."

The Government has also been forced to drastically cut the revenue forecasts for the mining tax, down from the May prediction of $13.4 billion over four years to just $9.1 billion now.

Despite the cuts, it has found room for a $20 million dollar campaign to "improve public understanding" of the National Broadband Network in the current financial year - which happens to be in the lead up to when the next election is due.

The Government hopes to save $499 million over four years by slowing funding for its 'Sustainable Research Excellence' program which aims to help universities meet the indirect costs of doing research.

The economic update does not include any extra money for the National Disability Insurance Scheme, which has deeply disappointed advocates of the policy.

"The Federal Government has lost a prime opportunity today for showing its commitment to support people with a disability, their families and their carers by locking in funding for a NDIS," Every Australian Counts Campaign Director John Della Bosca said.

"The Productivity Commission outlined a five-year roll out for the NDIS, which the Government started a year early, but without further funding commitments the issue is now whether the roll-out for all Australians with a disability is on track.

"We need a firm budget commitment from the Federal Government so we can lock in a date for when the NDIS becomes a reality for every Australian who needs it."

Treasury has maintained its estimated unemployment rate at 5.5 per cent, but has cut the economic growth forecast for the current financial year by 0.25 per cent to 3 per cent.

Mid-year economic update 2012-13 Key figures $1.1 billion new projected surplus for 2012-2013 $400 million amount projected surplus has shrunk by since May's budget $16.4 billion savings and extra charges included in the update $2.2 billion projected surplus by 2013-14 $22 billion hit to tax revenue included in forward estimates Savings $710 million estimates savings achieved by pegging increases in the private health rebate to inflation $505 million amount saved by limiting baby bonus $513 million money saved by shutting down Medicare teen dental program Revenue $520 million increased revenue over four years from raising visa charges for backpackers, graduates, overseas workers and partners of people already in Australia $9.1 billion new forecast revenue from mining tax, over four years $13.4 billion old forecast revenue from mining tax, over four years $8.3 billion money raised by making larger companies pay their tax instalments on a monthly instead of a quarterly basis Spending $1.1 billion blowout in cost of dealing with the rising number of asylum seekers arriving by boat $20 million new campaign to "improve understanding" of National Broadband Network

Topics: budget, government-and-politics, federal-government, business-economics-and-finance, australia

First posted