Costello Says Budget Is 'Tight' Despite Healthy Surplus

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

09 October 2003

Australian Treasurer Peter Costello has sought to dampen speculation that the government will deliver tax cuts ahead of the next election, describing the budgetary situation for the fiscal year ending June 2004 as 'tight'.

Last month, the government revealed a budget surplus of $7.5 billion for the fiscal year which ended on June 30 2003, way above its own forecast announced in May. There have since been calls from various groups for tax cuts before the next election, which is likely to take place towards the end of next year.

Speculation was increased by recent comments from Prime Minister John Howard, who told an Adelaide radio station that the threshold for the higher rate of income tax was too low. He described this as a "weakness" of the Australian tax system and suggested the income threshold should be increased from $62,000 to $75,000 per year before the top rate kicks in.

However, in media reports this week, Costello said that the government's first priority is fulfilling its public spending commitments before further tax cuts are considered. "It's quite a tight budgetary situation," said Costello, adding: "My view on tax is this: tax is what is required to deliver social services, defense and security."

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