The update comes as international financial turmoil has stripped $20 billion from the budget, causing the Government to downgrade its short-term growth forecasts and scramble to find savings that put the budget in the black by 2012-13 as promised.
That turmoil has also caused the Government to downgrade short-term growth from 4% to 3.25% in 2011-12, and from 3.75% to 3.25% in 2012-13. Household consumption is forecast to grow at 3% in both 2011-12 and 2012-13, which is also downgraded from the budget.
Wayne Swan said in a statement lower tax receipts, higher tax payments to victims of natural disasters and assistants to households as part of the Carbon Tax will lead to larger than expected deficit of $37 billion.
However, he maintains the Government's promise to deliver a surplus of $1.5 billion in 2012-13.
"The Government has responded to the more challenging fiscal outlook in a measured and balanced way, delivering $11.5 billion in new savings. The combined effect of all policy decisions has improved the budget bottom-line by $6.8 billion over the forward estimates."
It also appears the Government has deferred the introduction of a standard deduction tax returns, which would be implemented instead of using an itemised approach.
"Australia will return the budget to surplus ahead of all major advanced economies, and government net debt peaks dramatically lower than in these countries at 8.9% of GDP in 2011-12, before falling to 7.7% of GDP in 2014-15.
The major savings include:
Changes to living-away-from-home tax
The Government will stop misuse of the tax benefit by making individuals substantiate their expenses, and limit access to the concessions for temporary residents who maintain a home in Australia. These changes will ensure a "level playing field" exists between temporary and permanent residents, the Government argues – that will raise an extra $682 million.
The Government will also phase out the Dependent Spouse Tax Offset for those aged 60 years and over at July 1, 2012. That will raise $370 million over four years.
University funding
There will be a number of changes to university funding, "in recognition of the increased funding available to universities through the introduction of the demand-driven system on January 1, 2012, higher indexation rates and increased research and capital grants".
Reward funding for universities will continue to prioritise enrolment for students from low socio-economic backgrounds, along with reinstating the Band 2 contribution rate for math, statistics and science.
Both changes will save $10 million over four years.
Family payments
There will be some significant changes made to family payments, with the Baby Bonus to be reset at $5,000 and indexation paused, which will deliver $360 million over four years.
Also, family tax benefits will be subject to families who have completed immunisation requirements for their children, resulting in savings of $250 million.
"These stronger incentives will replace the maternity immunisation allowance and help improve immunisation rates over time," the Government explains.
Tax office
The ATO will save $436 million over the next four years through better data matching, and will also save $200 million from changes to taxation of financial arrangements.
Retirement income
The existing co-contribution scheme will be reduced, with the Government explaining its new low income super contribution is better targeted and will benefit three times as many low income earners. That initiative will save $1 billion over four years.
Concessional contribution cap indexes have been paused, with some measures announced in the 2010-11 budget also deferred. That will save $485 million over the next four years.
School education rewards
The reward payments for school improvements will be rephrased to allow for "greater stakeholder consultation", with funding provided to develop the National Schools Improvement Framework.
The Reward Payments for Great Teachers will be fully phased in over 18 months, with eligible teachers receiving rewards in the first and second years.
"The Government will continue to work with States and Territories to facilitate redesign of their performance management policies over this time."
Other savings
Savings have also been achieved through new pricing arrangements for visas, which will save $276.8 million over four years, while the Government will also provide a one-off efficiency dividend of 2.5% in 2012-13 to Commonwealth agencies and ask entities to report on reduced spending every year.
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written by John_Howard, November 29, 2011
