Swan had some justification for his pride pointing out how far the country had come since this time last year. In May 2009 Australia teetered on the verge of recession and had lost $60 billion in export earnings. Without a budget stimulus the economy would have contracted by 0.7 percent in 2009 but instead grew by 1.4 percent. The forecast contraction of 0.2 percent in 2009-2010 proved pessimistic and instead the economy grew by 2 percent. Unemployment peaked at 5.8 percent and is now falling. The government is now predicting a budget deficit of $40.8 billion for 2010-2011 ($16.3b less than forecast last year and $5.5b lower than the midyear forecast) and a return to surplus in 2012-2013 three years ahead of last year’s schedule.
Swan said those looking for a big-spending pre-election budget won’t find one. The levers for a return to surplus, according to the budget papers (pdf), were the natural recovery of tax receipts plus the reining in of spending growth to 2 percent a year. The biggest tax initiative was the well-flagged Resource Super Profits Tax due to start on 1 July 2012. The RSPT is expected to raise $700m in 2012-2013 and will be used to create a new infrastructure fund and pay for a one percent drop in company tax to 29 per cent in 2013-14 and 28 per cent in 2014-15. Swan said the measures would boost competitiveness, expand investment and job opportunities. Small business would go direct to the 28 percent rate in 2012-2013 with write-off for assets costing less than $5,000 and a depreciation pool for other assets.
In the environment there will be a new $652 million Renewable Energy Future Fund. Funding will support the development of renewable energy projects including wind, solar and biomass. The Fund will engage with households, businesses and communities to achieve energy efficiency. The small amount of money saved in deferring the CPRS until 2013 will be used to support the Fund. The Ethanol Production Grants Program will not be continued after 2011.
There is also a $661 million for a new Skills for Sustainable Growth strategy aimed at creating 39,000 training places and 22,500 apprentices with a guaranteed entitlement to a training place for all Australians under the age of 25 years. In infrastructure, the Government announced a $1 billion equity investment in the Australian Rail Track Corporation to fund rail freight works and lift capacity along the Brisbane to Melbourne, Melbourne to Adelaide and Sydney to Perth rail corridors. There is $71 million towards an intermodal terminal precinct at Moorebank to alleviate congestion at Port Botany in Sydney.
The Government is also spending $2.2 billion on health over four years. $772 million will fund better after-hours access to GPs, upgrades to around 425 primary care clinics and 23 new GP Super Clinics. There is also a $523 million nursing training program, $532m over five years for extra capacity in aged care and a $467 million project to provide personally controlled electronic health records called the Individual Electronic Health Record system. The Federal Government said it will fund its increased responsibilities of the Australian public hospital system through a combination of the national Healthcare Specific Purpose Payment and an agreed amount of GST. $5 billion in funding will come from the 25 percent increase in cigarette excise.
In personal taxation, the effective tax free threshold has been increased from $11,000 in 2007-08 to $16,000 in 2010-11 through increases in the Low Income Tax Offset. The 30 per cent tax threshold will be lifted from $35,000 to $37,000 and the 38 per cent tax rate will be reduced by 1 percent for taxpayers with incomes between $80,000 and $180,000. Simpler tax returns are also on the agenda. There will be a standard deduction pack to replace the tax return from 1 July 2012 with an optional $500 in work expenses rising to $1,000 in 2013.
Wayne Swan finished his budget speech by saying the Government’s job now was to convert the economic achievements of the past year into enduring gains. “We have great advantages, and a spring in our step,” he said. “We face the future with confidence, but not with complacency.” Swan need not worry on the score of complacency; a hostile media and resurgent opposition will see to that. Having got the bad news out of the way before the budget, the coast is clear for a Labor election campaign on economic credentials, a debate the Government will win.