‘Challenging’ economic conditions and the high Australian dollar will contribute to tax revenues being $60bn lower than expected over the four years to 2015/16 and put ‘huge pressure’ on the budget, he said.
However, Swan ruled out ‘radical cuts to the bone’, which he said would risk jobs and the economy. ‘To those who would take us down the European road of savage austerity I say the social destruction that comes from cutting too much, too hard, too fast is not the Australian way,’ he said.
Instead, Swan said the Labour government had ‘chosen a responsible path to surplus while supporting jobs and growth [and] to make our economy stronger, our nation smarter and our society fairer’.
According to the budget forecasts, the year to the end of June will show a deficit of $19.4bn – equivalent to 1.3% of gross domestic product – which will then fall slightly to $18bn – or 1.1% of GDP in 2013/14.
To address this, the government will make ‘targeted, sustainable’ savings worth $43bn over the four years to 2016/17 and continue its policy of fully offsetting all new spending with savings measures, Swan said.
‘This discipline gives Australia a responsible pathway back to balance in 2015/16 and surplus by 2016/17,’ he claimed.
In particular, the levy taxpayers contribute towards the universal health system, Medicare, will increase by 0.5% from July 1 2014. This will raise $11.5bn to fully fund the disability national insurance scheme, DisabilityCare.
The government will also close corporate tax loopholes and ensure multinationals and big businesses are not given an ‘unfair advantage’, raising $4.2bn over the four-year period to 2016/17, the treasurer said.
The $5,000 ‘baby bonus’, paid to parents of new-born children, will be scrapped, saving $1.1bn. Swan also confirmed that Australia would defer its target of increasing aid spending to 0.5% of gross national income by one year to 2017/18.
Together, these measures would reduce the deficit by around 0.5% of gross domestic product a year on average from 2013/14, he said.
