Howard Confident On Delivering Budget Surplus

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

23 April 2003

The Australian government is likely to deliver its promised budget surplus in next week's budget despite the costs of sending troops to Iraq and a slowing world economy. This is due largely to higher than expected tax revenues, predominately from oil levies.

According to reports, each $5 rise in the price of a barrel of oil results in an extra $250 million revenue generated from the Petroleum Resource Rent Tax which is imposed on oil company profits. This has effectively given the government a $500 million cushion in its finances this year, and further revenue from GST on petrol is also expected to boost the Treasury's coffers.

Last November, the Howard government predicted a $2.1 billion budget surplus for this year, rising to $4.9 billion in 2003/2004. Despite this, the Prime Minister has been sounding cautious notes on spending issues, and reiterated that expenditure will only allocated to high priority sectors.

However, some experts feel the government's finances are slightly better than the Mr Howard and Finance Minister Mr Costello are letting on. "Federal finances are looking a little more comfortable than either the Treasurer or the PM would like the spending ministers to realise," Access Economics director Chris Richardson told The Age. This has been helped by a stronger than expected return from the non-farm sector from which the bulk of the county's tax revenue is derived said Richardson.

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