Swan hands down fifth Budget

May 8, 2012, 12:00 am Yahoo7 Finance Yahoo7

Wayne Swan said his 5th Budget finances bold new policies to help Aussies with a disability, the aged and those who can’t afford dental care.

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Budget: The big numbers

• Defence - $5.4 billion, over four years
•Scrapping promised company tax cut - $4.8 billion, over four years
•Foreign aid - $2.9 billion over four years
•Tighter superannuation concessions - $2.4 billion over four years
• More than 3000 public service jobs to go

•National Disability Insurance Scheme - $1 billion
•Schoolkids Bonus - $2.1 billion
•Boosting family tax benefits - $1.8 billion
•$3.7 billion for the aged to remain at home longer
•$1.5 billion over five years for remote jobs and community program
•$38.8 billion over four years to higher education with extra support for students from poor backgrounds.

•$1.8 billion in tax breaks to Family Tax Benefit Part A
•Modest tax cut for those earning up to $80,000
•Extra $80 a week for parents of school children aged 16-19 and extra $820 for secondary school students and $410 for primary school students
•Superannuation guarantee rate rises to 12 per cent

Economic forecast
•$1.5 billion surplus in 2012-13, to rise to $7.5 billion by 2015-16
•Growth at 3 per cent in 2011-12
•Unemployment to remain at 5.5 per cent in the next two years

Families lavished with extra payments

Parents are big winners from the federal budget with a nervous government offering potentially thousands of dollars in extra payments in a bid to counter a backlash over the carbon tax.

From June, families will receive immediate payments, under the revised and renamed Schoolkids Bonus, of $410 per child in primary school and $820 per child in high school.

The payments, which will be made in two half-yearly instalments from 2013, were attacked by the federal opposition as a pre-carbon tax "sugar hit" for voters ahead of the imposition of the emissions price on July 1, 2012.

Increases to Family Tax Benefit Part A (FTBA) from July 1, 2013 will give an extra $300 a year to eligible families with one child and $600 for families with two or more children.

The increased payments, paid for by the mining tax under Treasurer Wayne Swan's "Spreading the benefits of the boom" budget catch-cry, come at the expense of a cut in company tax rates the government was forced to abandon, and also come on top of the carbon tax compensation package, announced in 2011.

The carbon compensation package included an increase in the tax-free threshold for income tax, from $6,000 to $18,200, and compensation payments to families worth up to $110 per child.

Under that package, a couple with one income of $70,000 and two children under five had the impact fully offset and, according to government figures, would have be about $30 a year better off.

Dual income couples with two children, who earn $100,000 between them, were only about $20 a year better off.

The measures announced by the Treasurer on Tuesday night comprise $1.8 billion in spending and extend compensation to the point where an eligible family with two children can receive up to $2,240 extra.

Mr Swan said all taxpayers earning up to $80,000 a year would get a modest tax cut from July 1, 2012.

The government is saving $361 million over four years by restricting eligibility for FTBA to children under 18 or in secondary school.

S for Surplus, not Superman

Treasurer Wayne Swan has hailed Australia's economic strength, with the budget heading back to surplus while other major economies around the world struggle.

The federal government expects a budget surplus of $1.5 billion in 2012/13, growing each year to $7.5 billion in 2015/16, achieved through $33.6 billion in savings.

"The deficit years of the global recession are behind us. The surplus years are here," Mr Swan told parliament on Tuesday.

The turnaround comes despite continuing falls in tax revenue - down $12 billion in 2011/12 and 2012/13 - which are being driven by global economic uncertainty and consumer caution.

That contributed to an estimated deficit of $44.4 billion in 2011/12, taking net debt to a peak of $142.5 billion, or 9.6 per cent of gross domestic product (GDP).

But the resources boom will ensure steady economic growth, with GDP forecast to grow by 3.25 per cent in 2012/13, and 3.0 per cent in the following year.

GDP growth in the US is forecast to peak at 2.5 per cent in the years ahead, and at 1.25 per cent in the euro zone.

By the middle of 2014, Australia's GDP is expected to be more than 16 per cent larger than before the global financial crisis, Mr Swan said.

"That outperforms every single major advanced economy," he said.

"So in this perspective, it is entirely appropriate that we are returning to surplus."

Having a surplus builds a buffer against the volatile global economy, and gives scope for the central bank to move interest rates, the Treasurer said.

Europe casts a shadow over the entire world, but the United States' long road back to economic strength remains vital, Mr Swan said.

"This question mark on the global economy really hinges on what is going to happen in the United States," he told reporters.

"The global economy can do without Europe, but it can't necessarily do without the United States returning to strong growth."

Australia's proximity to Asia is another positive for economic growth, with the budget forecasting demand from the region, particularly from China, to continue to support high commodity prices and record levels of investment in the resources sector.

Spreading the benefits of that mining boom formed the centrepiece of the government's spending measures in Tuesday's budget.

Unable to pass company tax cuts through parliament, the government now proposes to spend $3.6 billion on benefits to families and small businesses.

Large corporations lose out though, with only $714 million outlayed for companies struggling with the high Australian dollar to get a tax break on operating losses.

Budget savings come from the scrapping of the company tax cut, plus efficiencies in defence and aid spending.

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