Australian budget raises taxes, cuts spending as deficit hits $A50bn
The Abbott government has confirmed sweeping tax increases and aggressive spending cuts in a budget that tackles a yawning deficit of nearly $A50 billion.
Treasurer Joe Hockey outlined plans to reduce welfare spending on families, pensioners and the unemployed. High earners will face a temporary 2% tax on income above $A180,000, while motorists will face an increased fuel levy.
Mr Hockey says the shock treatment is needed to reverse a long string of deficits under the previous Labor government, cut rising government debt and restore the economy to robust growth.
He says Australia has been "beyond its means" since the mining boom ended and cut the flow of government revenue.
"We were not prepared to stand by while a fire was starting in the house, " he says. "Unless we fix the budget together we will leave the next generation a legacy of debt, not opportunity."
The government projects the budget deficit will fall to $A2.8 billion in four years – from the $A49.9 billion estimate for the present fiscal year ending June.
Benefits for business
Big and small business are among the few beneficiaries with promised tax cuts and big infrastructure spending.
The corporate tax rate will drop by 1.5 percentage points from July 2015, helping about 800,000 businesses. That's on top of the axing of the carbon tax and mining tax.
The tax cut will offset the burden of the government's paid parental leave scheme, also due in July 2015.
A new $A11.6 billion outlay on infrastructure, set to take the total spend to $A50 billion by 2020, will provide new projects for big business.
Companies will receive financial assistance to access export markets, manufacturers moving into new growth industries will be eligible for grants, while the energy and resources sector will be encouraged to explore for new mineral deposits.
"Rather than corporate welfare, the government's focus will be on strengthening the overall business environment, so that enterprise, large and small, can create more jobs in Australia," Mr Hockey says.
Winners and losers
Medical researchers and working mothers are favoured while most families and pensioners will be worse off. Some specific measures are:
- Student loans to be repaid once salary reaches $A50,638 from July 1, 2016
- School funding cut by $A30 billion over the next four years and more of the cost will be handed to the states.
- $A20 billion medical research fund to be established
- Doctor’s visit charge of $A7 for pensioners and children
- Hospital funding to the states cut by $A1.5 billion
- Indexation of fuel excise reintroduced from August 1 will add 2-3Ac a litre to petrol
- No unemployment benefit for six months for new jobseekers under 30
- Work for dole scheme
- Paid parental leave scheme introduced with an income cap of $A100,000 a year
- Dependent spouse tax offset abolished
- The retirement age will rise to 70 by 2035
- Pensions indexed to inflation rather than wages.
For more detail on the Australian Budget 2014, see the budget in detail.
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