The Federal Government is warning businesses to brace for a tough budget next month as new figures show a $4.5 billion revenue shortfall, prompting the need for harsh spending cuts.
Federal Treasurer Wayne Swan has insisted the budget will return to surplus in 2012-13 as part of Labor’s election promise, but a host of other factors are seriously impacting the budget’s bottom line.
“The summer’s natural disasters, continued consumer caution, the subdued recovery in household wealth and the higher dollar are all weighing heavily on government revenues,” Swan said in a statement.
The Treasury’s latest figures show business tax collections are $3 billion lower than expected while personal income tax collections are down by about $1 billion.
“Losing big slabs of revenue like this, of course, makes it even tougher to get back to surplus as planned, but we’re determined to make the difficult decisions to meet that commitment,” Swan said.
The new figures come just a week after it was revealed the floods and Cyclone Yasi will cost the economy about $9 billion, with a further $2 billion cut to export earnings due to the earthquake and tsunami in Japan; Australia’s second largest export market.
Finance Minister Penny Wong has said while the budget won’t necessarily be a popular one, it will be “very focused on the short- and long-term needs of the economy”.
“I’m not going to get into rule in, rule out for the budget. We are making our way through the budget process and we will make decisions in the national interest, looking to where we have to go,” Wong said.
“The Prime Minister has made clear not only do we have to make room for the private sector expansion, we also have to look to things such as skills and participation.”
Wong’s comments come on the back of a call by Australian senior executives that the Government uses the budget to dramatically increase the intake of skilled migrants to tackle skills shortage and reduce wage inflation in booming sectors such as mining.
Business Council of Australia president Graham Bradley says addressing skills shortages needs to be “front and centre” at this year’s budget.
“With the unemployment rate back under 5%, the budget should focus on addressing immediate skills shortages by improving the flexibility of education and training,” Bradley says.
“[The budget should also demonstrate] a commitment to maintaining the permanent skilled migration problem, including new initiatives to improve access to skilled temporary migrant workers.”
Bradley says there are concerns about the cost and processing times for the 457 visa program, which should be improved.
Federal Opposition leader Tony Abbott says the Government is to blame for the need to introduce a tough budget, not economic circumstances.
Abbott described the Labor Party as a “wasteful” government, which will inflict “unnecessary pain” on the Australian public as a result of its incompetence.