Updated
Treasurer Wayne Swan has revealed cuts to baby bonus payments and the private health insurance rebate to protect his promised budget surplus.
Today's mid-year economic update shows lower commodity prices and falling tax receipts have trimmed the projected 2012-13 budget surplus to just $1.1 billion, down from the $1.5 billion predicted in May.
Read the Mid-Year Economic and Fiscal Outlook 2012-13
There has also been a further write down in tax revenue over the forward estimates of almost $22 billion, including $4 billion in the current financial year.
As a result, Mr Swan has revealed spending cuts and extra charges worth $16 billion over four years, including:
- Limiting increases in the private health insurance rebate to inflation, saving $710 million over four years.
- A jump in visa application fees, forecast to raise $520 million over four years.
- The baby bonus payment for the second and subsequent children will be reduced to $3,000, saving $505 million over forward estimates.
- Delaying funds for Labor's trades training centres program, saving $305 million.
- Saving $513 million by shutting down the Medicare teen dental program
How will the spending cuts affect you? Have your say.
Mr Swan says the savings measures will help return the budget to surplus, which in turn will give the Reserve Bank more room to cut interest rates.
"We haven't taken any of the savings that we've made today lightly, but we've made sure that they don't hurt the economy or don't hurt the most vulnerable," Mr Swan told reporters in Canberra.
One of the biggest revenue measures announced in the budget update is a change in how regularly companies pay tax.
From the start of 2014, companies with an annual turnover of more than $1 billion will begin paying tax in monthly instalments, rather than quarterly.
The change will gradually be rolled out to other businesses, in a move the Government expects will boost the budget bottom line by $8.3 billion over four years.
"We stand ready to work with the business community in introducing this important reform for the company tax system," Mr Swan said.
MYEFO figures at a glance
- $16.4b in savings and extra charges
- 2012-13 surplus now projected to be $1.1b, down from $1.5b in May's budget
- Surplus projected to hit $2.2b in 2013-14
- GDP forecast to grow 3% in 2012-13
- Demand for raw materials such as coal, iron ore is falling
- Unemployment steady between budget forecast and MYEFO at 5.5%
- Baby bonus cut to $3,000 after first child
"It's not an increase in tax, it's simply a change in the timing of the payment."
Baby bonus cut
From the middle of next year, the baby bonus payment for the second and subsequent children will be reduced from $5,000 to $3,000.
Mr Swan says the payment has been reduced because there are many items, such as a cot or a pram, that do not need to be repurchased for a second child.
"We believe that these changes to the baby bonus will bring in more into line with actual costs of having children," he said.
"Many people will see this as a tough decision, I understand that," he said.
"But in the suite of support that we provide to families... all of those things indicate that we are very strong supporters of providing assistance to families."
The Government has also decided to scale back the private health insurance rebate, by linking its growth to the rate of inflation in instances when premiums are increasing faster.
In effect, it will mean the rebate will not keep pace with the rising cost of private health insurance.
Mr Swan says the move will make government spending in the area more "sustainable", saving $700 million from early 2014.
The Greens have attacked the budget changes, arguing that any surplus will be achieved on the back of the most vulnerable people in the community.
"The Government has not made any provision to increase the NewStart allowance by $50 a week, which everybody recognises is necessary," Greens leader Christine Milne said in Canberra.
"So you have a whole lot of people out there, who are desperately trying to seek work (and) who are being driven further into poverty, and we're told by Wayne Swan that he is actually doing this without hurting the most vulnerable.
"Well, he's not."
Border protection
The economic update does not provide any detail of how much it is costing to re-establish immigration detention centres on Manus Island or Nauru. It says contracts are still subject to commercial negotiations.
However, it reveals a $1.1 billion blowout in the cost of dealing with the rising number of asylum seekers arriving by boat.
The Government has also drastically cut the revenue forecasts for the mining tax, down from the May prediction of $13.4 billion over four years to just $9.1 billion now.
Despite the cuts, it has found room for a $20 million dollar campaign to "improve public understanding" of the National Broadband Network in the current financial year - which happens to be in the lead up to when the next election is due.
Treasury has maintained its estimated unemployment rate at 5.5 per cent, but has cut the economic growth forecast for the current financial year by 0.25 per cent to 3 per cent.
Topics: budget, government-and-politics, federal-government, business-economics-and-finance, australia
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