New hit to budget revenue

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.”