Saturday, September 25, 2010
THE federal government is banking on the improving economy to lift its tax take by close to $100 billion a year over the next three years, after 2009-10 saw the take collapse to almost the lowest level in 30 years.
Treasurer Wayne Swan and Finance Minister Penny Wong reported yesterday that the underlying budget deficit the budget's bottom line ended up at a record $54.75 billion, or 4.2 per cent of the nation's GDP.
The government's balance sheet went from net assets of $16 billion to net debt of $42 billion, or 3.3 per cent of GDP. It is expected to peak at 6 per cent next year.
Mr Swan and Senator Wong reaffirmed the government's goal to return the budget to surplus by 2012-13. But the budget figures show this assumes a huge increase in tax revenue, and a big fall in spending as a share of GDP.
"Our budget position is in far better shape than most comparable countries," Mr Swan said. He described the deficit as "the inevitable consequence of the most serious global downturn since the Great Depression".
Before the global financial crisis, the government had been forecasting a surplus of $19.7 billion. But the crisis and the government's stimulus programs to fight it combined to turn that around by almost $75 billion.
Revenue collapsed by $48 billion from the forecasts before the crisis, as company profits shrank and Australians earned less and spent less.
Taxes shrank to just 20.1 per cent of GDP, down from 23.5 per cent over the previous decade and only marginally higher than at the bottom of the 1991-92 recession.
The government is counting on a quick rebound in tax collections, along with severe restraints on spending, to lift the budget back into surplus as promised in 2012-13.
With no tax cuts ahead, it forecasts that tax collections will rise by $93 billion over the next three years, lifting the total tax take from $261 billion to $354 billion by 2012-13, when the budget is to be back in surplus.
While taxes shrank, spending boomed to 25.9 per cent of GDP, the highest level for 23 years. Most of this was on temporary stimulus programs ($23 billion), while an extra $11 billion was spent on other programs such as schools and hospitals.
Shadow treasurer Joe Hockey said the government had created the biggest deficit in money terms Australia had seen, and this new financial year would be the second biggest. "The more they spend, the more the upward pressure on interest rates," he said.