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New hit to budget revenue

The estimate of budget tax revenue collection for 2012-13 has been further slashed, with the Treasury now saying it will be $12 billion less than forecast in October. The revision is another blow to a…

Prime Minister Julia Gillard will today announce significantly lower than estimated tax revenue. AAP/ Shane Eecen

The estimate of budget tax revenue collection for 2012-13 has been further slashed, with the Treasury now saying it will be $12 billion less than forecast in October.

The revision is another blow to a highly stretched May 14 budget but Julia Gillard today will give an assurance that the Gonski school funding program, for which she is still trying to win state support, and the National Disability Insurance Scheme will not be threatened.

She will also again make it clear the budget – which the government has said will stress the protection of jobs - will eschew a slash-and-burn approach. Treasurer Wayne Swan had the same message, saying in his weekly economic note: “we will never cut to the bone, putting jobs and growth at risk by taking an axe to the economy.”

Announcing the new figure, the PM says in her speech that the amount collected so far this financial year is already $7.5 billion less than was estimated last October and the latest forecast is that “this reduction will increase to around $12 billion by the end of the financial year.”

“This unusually low revenue, which wasn’t forecast even a few months ago, creates a significant fiscal gap over the budget period”, she says in an address for a Per Capita think tank function.

“But we won’t, during this time of reduced revenue, fail the future by not making the wise investments that will make us a stronger and smarter nation.”

Better school funding and school improvement will not be jeopardised.

“Our nation cannot afford to leave children behind or to leave our nation’s future economy limping behind the pack, unable to attract the high wage, high skill jobs of the future”, she says.

“And we won’t fail to make the wise investments that make us a fairer nation. Disability care must not be jeopardised.

“A fragmented, unfair, inefficient system hurting 400,000 Australians with disability and their families and carers – and putting at risk anyone who could acquire a disability – cannot be left in place.”

These investments are affordable “if we make smart decisions”, she says.

The budget will be about a national challenge and a national plan, and will also be about a choice, she says.

“Our opponents and their friends crudely flaunt the bitter language of the cut throat and the brandished axe. We govern for all Australians, we govern to strengthen the economy and to spread the benefits to all”.

The challenge will be to respond to the huge reductions in revenue growth over the next four years, while the plan will be to make necessary investments in the nation’s future, to ensure that people are not left behind.

She points out that revenue is being hit by the fact prices for what Australian companies sell overseas are lower, imports are cheaper, local competition is fierce. “Those things add up to business making less profit than planned. When businesses make less profit than planned, it also means Government gets less money in tax than expected.”

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21 Comments sorted by

  1. Greg Boyles

    Lanscaper and former medical scientist

    This is what happens when pi$$ week governments rely on short lived economic 'get rich quick' schemes (mining and property speculation) rather than guiding the economy and the masses towards long term economic sustainability through technological industries where Australia has a chance to compete successfully on the global market.

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  2. Dao Nguyen

    logged in via Facebook

    It is just not on! Eight month ahead myefo forecasts for annual revenue with four months of actual revenue data already known yet the percentage error will be around 3%. I should think there are very good reasons for an overhaul of government revenue forecasting system.

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    1. Greg Boyles

      Lanscaper and former medical scientist

      In reply to Dao Nguyen

      We need far more than an overhaul of revenue forecasting.

      We need an overhaul of major party vision on the economic direction of Australia!

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    2. Lincoln Fung

      Economist

      In reply to Dao Nguyen

      That is a good point, Dao. I agree it is highly unsatisfactory. I also remember during the Howard-Costello years, there was persistent under forecasting. Now it seemed there was persistent over forecasting of revenues that have resulted in overspending.
      It is not necessarily just the forecasting system that should be overhauled, there should be some review or investigation on whether the Treasury has been unduly influenced politically, so either they couldn't not say the truth or they didn't wish to face the reality.
      A hope is that the parliamentary budget office may be more independent of the government of the day and can do a better job.

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  3. Tony Grant

    Student

    NDIS...I see Abbott doing what he enjoys best...running/swimming and riding for charity. While his (Abbott's) bike ride may seem a wonderful endeavour (raised $3 mill) over several years it is pre 1950 services to the poor and unfortunate...the wealthy "doing their bit" with cucumber sandwiches and iced tea?

    Is this what our nation has come to a PM in waiting believing that a "fun run" or the like will serve this nation's future, this is really worth much thought? Remember as health minister…

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  4. George Naumovski

    Online Political Activist

    A fair and realistic tax system needs to be implemented. Taxes such as the original mining tax “RSPT” and other taxes as such should have been done.

    Millionaires/Billionaires and the business elites get massive tax cuts, subsidies, write offs and many other loopholes so they actually don’t pay tax.

    A low income earner “the majority of working Australians” pay a higher rate of tax for their wage compared to higher income earners due to higher income earners actually get more money “so when higher income earners cry that they pay more tax they still take home double/triple amount of money compared to a low income earner” and it’s the perks/loopholes/subsidies/middle class welfare they receive and it’s the majority who pay for it while they get very little to nothing.

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    1. Robert Attila

      Business Analyst

      In reply to George Naumovski

      George, do you have any 'facts' about your claims or just guesses & angst?

      1. I mean "A low income earner “the majority of working Australians” pay a higher rate of tax for their wage compared to higher income earners".. r u serious? The fact is the more you earn the higher the rate of tax. What planet r u on?

      2. "higher income earners ..... still take home double/triple amount of money compared to a low income earner” - well duh! And so what? Why should a labourer receive what a qualified…

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    2. John Perry

      Teacher

      In reply to Robert Attila

      "Its THEIR MONEY, thus they have much more right to get some of it back than those who haven't paid tax."

      Is this REALLY your understanding of the tax system?

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    3. Robert Attila

      Business Analyst

      In reply to John Perry

      I should have pressed 'send' b4 closing down my PC .. sigh....

      No, but i didnt want my point to be lost in a more accurate & specific explanation of tax.

      The point was simply to remind people that tax is not the govts money nor the poor's. Its the tax payers money. And tax is not usually volunteered, its forcefully taken or extracted from them. If you refuse you go to jail - essentially for not giving the govt your own money. Anyone else doing that would be categorised as a standover thug…

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    4. Robert Attila

      Business Analyst

      In reply to John Perry

      Even though i bag politicians world wide, i do nevertheless see their tough almost no-win position.

      You may on the one hand have policies that may do wonders for the economy or population but may be unpopular. What do you do? The right thing or what keeps you in power?

      Hence why voters can be their own worst enemy, being short-sighted rather than far sighted.

      Comes down to how well govts, or anyone for that matter in business or privately, can promote their view to ensure you get the backing of everyone for the best solution.

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  5. Peter Lang

    Retired geologist and engineer

    I wonder why our revenue is in such a slump.

    I believe one of the most significant contributors is the damage the Rudd and Gillard Labor Governments has done to business confidence and to Australia's international competitiveness. It is, IMO, the worst government Australia has had in over 60 years.

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    1. Michael Guy

      Clinical Psychologist

      In reply to Peter Lang

      Business Confidence is so low that we have had a huge boom in mining investment? In fact the country is so strong economically that the dollar has risen in value reducing profits and reducing company tax receipts. Don't let facts get in the way of your political ideology.

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    2. Robert Attila

      Business Analyst

      In reply to Michael Guy

      AUD is high because interest rates r low overseas & we r seen as last few decent remaining economies left.

      Both parties have wasted the last decade with buying votes from all classes throwing away teh surpluses that should have been saved or at least invested into infrastructure rather than extremely expensive school extensions, free insulation, & the baby bonus.

      All parties have good & bad aspects, just like people in general.

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    3. Michael Guy

      Clinical Psychologist

      In reply to Robert Attila

      Imagine if we had a sovereign wealth fund and some funds from that were invested internationally to help push down the dollar. No we had tax cuts instead - from both parties.

      The Auditor General calculated the overspend on schools was 6% - I would not classify that as extremely expensive. At the end of last year Jeremy Grantham of GMO suggested the US Government pay for home insulation so maybe not such a bad idea. I note that domestic electricity consumption has fallen and some of that will…

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    4. Robert Attila

      Business Analyst

      In reply to Michael Guy

      I agree Michael. Wasted opportunities…

      Govts tend to ruin things they tamper with, we can include reserve/federal banks as well. Capitalist markets r very similar to nature, in that they self level or balance as long as the laws r obeyed. Bubbles are caused when govts/fed banks manipulate int rates & pass laws that favor some sections of society at the expense of others. So i would not want them trying to fix the mess that they instigated/created. US, Japan, EU r perfect examples of failed socialist…

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    5. John Armour

      logged in via email @bigpond.com

      In reply to Robert Attila

      "BTW, i have a commerce/IT degree (economics,accounting, finance majors) with businesses built from the ground."

      That could be another definition of chutzpah. Robert, you are one very funny guy.

      I don't have any formal qualifications in economics yet I could take your post apart line by line and (politely as I can) point out where you are wrong.

      Just to take your first paragraph...

      "Capitalist markets r very similar to nature, in that they self level or balance as long as the laws…

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  6. Colin MacGillivray

    Architect, retired, Sarawak

    Clearly in future the Treasury will have to give a range of estimates or a percentage likelihood that they will be close, like some weather forecasters. If Australia was a large company and got their revenue forecast this wrong the share price would plummet. It's probably easier to run a nation than to run a large company.

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    1. James Jenkin

      EFL Teacher Trainer

      In reply to Colin MacGillivray

      Sure Colin, the people doing the forecasting were way out.

      But imagine this happening in any company, Finance make an unusually optimistic forecast. Shouldn't the boss question this? Rather than spending up big, fingers crossed?

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  7. James Hill

    Industrial Designer

    If all this confected concern about budget deficits were genuine then the focus would be on what sort of budget position an incoming Abbott administration would produce next year.
    Voters have a rare chance to affect next year's budget.
    Yet, instead of the facts needed to guide voters about the fiancial consequenses of their choices in September, we have the present budget presented in the infantilised manner of the Teddy Bears' Picnic where we will all be in for a "Big Surprise".
    This is beyond…

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  8. John Clark

    Manager

    A bankrupt investor would of course say that his investment plan was not to blame, it was the forecasts on which it was based, and therefore not his fault. Similarly, Labor has no interest whatsoever in expenditure restraints, its only objective is to spend, regardless of the ability of the productive sector of the Nation to provide the funds. This has now morphed into a desperate strategy to commit the incoming Coalition to expenditure it cannot possibly sustain. As a consequence, they will be able to discredit the incoming Government by claiming they are against assisting the disabled and anti education. A fair analogy is to burn down your house so your estranged partner cannot benefit.

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