Australian Treasurer Counts Down To Budget

by Mary Swire, Tax-News.com, Hong Kong

03 May 2011

With the Australian Budget only a week away, the Treasurer Wayne Swan has been burning the midnight oil putting the final touches to the all important document he will be reading out to the nation on May 10.

He says that the next Budget will be about getting the country back in the black, getting more Australians in jobs, and spreading the opportunities of the mining boom. It will also juggle two very different challenges. Firstly, the short-term challenge of lower tax revenues due to natural disasters and a patchwork economy where some sectors are still weak. Secondly the longer-term challenge of price pressures caused by the massive mining boom that is gearing up again.

He has reiterated what he has said recently about the mining boom not being a direct copy of the previous one, saying that although there will be government revenue from the resources sector, there won’t be massive increases because of the higher dollar and because of the higher levels of investment that will be required by the mining companies.

“While mining boom mark II will clearly be very beneficial for Australia, it's only through the right policy settings that we can take advantage of the tremendous opportunities presented by the Asian Century. As with our response to the GFC (global financial crisis), Australia will succeed by choice, not by chance”, he says.

He is aware that businesses, households and individuals are all being affected in various ways and to varying degrees by the fundamental economic changes caused by the mining boom, and says that the mission of the Budget is to spread the benefits of a stronger economy so the opportunities are shared by all Australians.

The carbon tax is another subject currently dominating Australia’s news bulletins, and the Treasurer says that he has been disappointed by some of the more outrageous claims that have been made over the past few weeks.

“There needs to be a calm and rational discussion about this critical economic reform. Talk of communities being wiped off the map and industries closing down is not only false, it's irresponsible. The fact is the impact of a carbon price on sectors such as coal, steel and aluminium will be negligible compared to fluctuations in commodity prices and exchange rates”, he said.

Although a carbon price has not yet been fixed, Swan says that a carbon price of AUD20 a tonne would have about one-twentieth of the impact on the steel industry of that caused by the increase in the Australian dollar over the past four months.

“New analysis by Treasury shows that currency appreciation has cut the price that Australian steelmakers receive by about AUD50 a tonne this year, compared with the AUD2.60 a tonne impact on their core activity of a AUD20 carbon price. When you consider that steel traded between AUD600 and AUD1,200 a tonne from 2005 to 2010, it shows the effect of the introduction of a carbon price will be relatively small.”

Under the carbon price, he says that the government will provide assistance to trade-exposed, emissions-intensive industries, including steel, to support jobs and competitiveness, and that this assistance will be designed to stop jobs moving overseas and help businesses prepare for the low-carbon future.

“The government doesn't underestimate the competitive pressures faced by industries such as steelmaking caused by the high dollar, high commodity prices and the fallout from the GFC. But let me be clear, the carbon price is not driving these pressures,” he says.

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