Treasurer Wayne Swan announced what he called 'responsible' cuts to cope with the global decline and still produce a budget surplus.
EMMA ALBERICI, PRESENTER: The Treasurer is calling today's budget cuts responsible. The Opposition says they're an attack on families and corporate lobbyists claim business is in the firing line.
The Government has maintained its promised surplus, albeit smaller than originally intended.
Economists say political jousting is obscuring the bigger picture, with one telling Lateline tonight that Canberra must stop tinkering and start to make real structural changes to reduce the Government's reliance on the mining boom.
Political correspondent Tom Iggulden reports.
TOM IGGULDEN, REPORTER: Today Wayne Swan admitted what economists have been foreshadowing for months, that his budget surplus is in trouble thanks to falling commodity prices on the world market.
WAYNE SWAN, TREASURER: Now this lower global growth outlook has had another very big whack at government tax revenues and made it harder to deliver a surplus.
TOM IGGULDEN: That whack's $4 billion worse than forecast for this year and $5 billion worse for next year. That means finding savings to keep the Treasurer's budget surplus intact.
WAYNE SWAN: And we're targeting our savings to have the least impact on the economy and on the vulnerable.
TOM IGGULDEN: The biggest save, $8 billion over four years, will have Australia's 350 biggest companies pay their tax monthly, expanding to smaller companies in later years.
GREG EVANS, AUST. CHAMBER OF COMMERCE AND INDUSTRY: Once again we're seeing that business is firmly in the Government's firing line when it comes to helping out the budget bottom line.
TOM IGGULDEN: Family payments also take a hit, most significantly a further tightening of the private health insurance rebate and a reduction in the baby bonus from $5,000 to $3,000 for every child after the first.
WAYNE SWAN: After the first child, you've already bought the cot, the pram and the other items that you can use again. Now this is a tough decision, but it will help improve the sustainability of the family payment system over time.
TONY ABBOTT, OPPOSITION LEADER: Wayne Swan is hurting families' budgets so he can patch up the Government's budget.
TOM IGGULDEN: But without a single major budget cut, Wayne Swan's tinkering deprived the Opposition of a killer blow. Its main beef is what it calls the Government's lack of vision.
TONY ABBOTT: This is a government, a prime minister and a treasurer that has a political strategy rather than a real economic strategy.
TOM IGGULDEN: Many of today's tinkers will need to be legislated. The Opposition's not committing its vote for now.
TONY ABBOTT: Obviously we don't like these changes, but I'm not going to state now exactly what our position will be. We have to further digest this.
TOM IGGULDEN: Wayne Swan's already being asked if he'll have to find further budget cuts next May if the global economy continues to slide in coming months.
WAYNE SWAN: I'm not entering into that sort of game. I never do and I'm not doing it today.
TOM IGGULDEN: But economist Warren Hogan's calling on Canberra to look beyond the short term.
WARREN HOGAN, CHIEF ECONOMIST, ANZ: There is real risk that our budget is still not aligned to the new reality of the post-financial crisis world.
TOM IGGULDEN: That's a reality where the budget can no longer rely on high commodity prices to fill government coffers year in, year out.
WARREN HOGAN: The real issue is: should we at some stage bite the bullet, make an estimate of what actually the structural budget position is, that is, the budget position adjusted for these cyclical factors around commodity prices and so forth, and make some real cuts to the government expenditures and government spending.
TOM IGGULDEN: As for today's cuts, well, what Wayne Swan takes, the Reserve Bank could at least partially be giving back as soon as Melbourne Cup Day. Economists like Warren Hogan say that today's economic update adds to the case for another interest rate cut.
Tom Iggulden, Lateline.
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