08 September 2015
by Jacob Greber
Parliamentary Budget Office finds budget gap slashed by $30b
A burst of co-operation by Labor in recent months has improved the federal budget by almost $30 billion over the next decade but the decision by the Coalition last week to scrap a proposed bank tax means gains could have been larger.
The Parliamentary Budget Office's latest running tally of the value of decisions announced in the budget but not yet passed by the Senate, has fallen to $74.1 billion from $102.3 billion at the end of May.
Most of the improvement in the 10-year budget position is due to Labor's decision to support the re-indexation of fuel excise, a measure that will add $22.8 billion to commonwealth revenue between now and 2025-26.
While some of the legislative shortfall has closed, the budget office figures again underscore the vulnerability of the Abbott government's plan to return the budget to surplus next decade.
Even if all the legislated measures ultimately win passage through the Senate – something that is almost certain not to happen – the projected surplus depends on an almost unheard of five-year run of 3.5 per cent annual growth, and no less than $7 billion a year in payments from the Future Fund from 2020 onwards.
Despite all these factors, projected surpluses are still likely to be wafer thin, or well below 1 per cent of GDP, say Treasury budget projections.
As well as the decision to re-index fuel excise, other improvements to the budget position include a decision to cut the tax offsets on a research and development tax incentive. This will improve the budget by $2.5 billion over a decade.
But this is likely to be offset by the Health Minister's decision not to go ahead with an increase in pharmaceutical benefits scheme co-payments and safety net thresholds worth $4.8 billion.
Family tax benefit reductions
Some of the biggest savings from last year's budget that are unlegislated, include reductions in family tax benefits, valued by the budget office at $17.2 billion over 10 years.
A total of 23 expense measures and two revenue measures covering the last two budgets and the 2014 MYEFO are on the list.
The only remaining measure from Labor's time in office is the proposed 0.05 per cent levy on bank deposits up to $250,000, which Prime Minister Tony Abbott said would not go ahead, despite the fact it would have enjoyed bi-partisan support.
The levy would have raised a much-needed $4.5 billion over a decade and helped reduce the impact of future financial crises on the Commonwealth's balance sheet.
As the budget office published the figures, shadow treasurer Chris Bowen slammed Treasurer Joe Hockey's record over the last two years, saying the nation is paying for his incompetence.
"He is the man without a plan. He is the man who has delivered 0.2 per cent growth for the quarter, the lowest growth in a decade," Mr Bowen said.
"We have the mixed messages about the Australian economy.
"We have gone from budget deficits, a debt and deficit disaster and budget emergencies to now, when the urgent moral prerogative of the age is to provide personal income tax cuts."
Greens Treasury spokesman Adam Bandt seized on the budget office figures, saying an extra $106 billion could be raised "fairly" by targeting tax breaks like super concessions and negative gearing.
"The Senate has rightly refused to go along with the Abbott government's attempts to cut support for the young, the old, the sick and the poor and make Australians pay more to go to uni," Mr Bandt said.
"Not only is Joe Hockey pushing ahead with this unfair agenda, he's also planning to cut revenue by another $25 billion over the next four years with his income tax cuts."