Swan Highlights Australian Budget Benefits

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

18 May 2011

Following on from last week’s budget the Australian Treasurer Wayne Swan has been keen to emphasize a number of positive facts relating to the country’s economy, although small business representatives feel that the budget lacked ambition.

In a recent statement, Swan highlighted the following:

• Around an extra 500,000 Australians are forecast to get a job in the next two years, building on more than 700,000 positions created since the government came to office.
• Real spending growth will average just 1% a year over the next five years.
• The government is achieving the fastest positive turnaround in the Budget position on record and returning to surplus in 2012-13.
• government revenues are down AUD40bn (USD42bn) this year and AUD130bn over the five years to 2012-13 because of the lingering effects of the global financial crisis, as well as the impact of the high Australian dollar and natural disasters.
• The government has put in place AUD22bn in savings, with a net return to the Budget bottom line of AUD5.2bn over the forward estimates. Many of these will deliver ongoing savings that improve the structural position of the Budget for years to come.
• The government is delivering significant tax reform, with 12 measures announced since the last Budget based on reform directions identified by the Australia's Future Tax System Review. These include improving participation incentives for spouses without children by phasing out the Dependent Spouse Tax Offset, and changes to the fringe benefit treatment of cars to remove the unintended incentive for people to drive more than they need to in order to obtain a larger tax concession.

“The Budget isn't about winning the next week's opinion polls. It's about getting the settings right for a strong, secure and sustainable economy that will benefit all Australians in the years to come," said Swan, adding:

“I took no joy in implementing the difficult savings decisions in the Budget, but they were the right and necessary things to do. Tough decisions now will avoid tougher decisions in the future."

“Our strict spending rules that will return the Budget to surplus in 2012-13 are critical so that we're not compounding the price and capacity pressures in the economy as the mining boom hits top gear."

The budget has generally been received positively by business groups, although the Australian Chamber of Commerce and Industry (ACCI) suggested that Swan's plans lack long-term ambition.

ACCI's Chief Executive Peter Anderson said that "the Budget gets the short term thumbs up but whether it works in the mid to longer term on either the productivity side or the return to surplus depends heavily on good fortune and hope."

"Small business will feel short changed," Anderson continued. "The extra depreciation on capital purchase of new vehicles is good but change in fringe benefits on motor vehicles could be counter-productive. There is no real relief on business costs, red tape or compliance."

"It is disappointing but not surprising that there are no major tax reform changes in the budget," he added. "The proposed carbon tax is not in the Budget but it remains a dark economic cloud on the horizon for industry."

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