(Bloomberg) -- Australian Treasurer Wayne Swan will tonight unveil a Robin Hood-style budget, slashing tax breaks and welfare-payments to high-income earners as he tries to contain a record deficit amid the global recession.
Swan will take away subsidies for the rich while protecting payments to lower-income earners, the aged and the unemployed in the budget, framed amid an economic slump that has cut tax revenue by more than A$200 billion ($153 billion), economists say. He releases the budget at 7:30 p.m. in Canberra.
The Labor government of Prime Minister Kevin Rudd will unveil a A$34 billion deficit in the year ending June 30, the first shortfall in seven years, as tax revenue from a commodities export boom dries up, according to the median of 16 economists surveyed by Bloomberg. Swan warned today there “will be tough decisions,” as he tries to limit debt in a budget the treasury department says won’t return to surplus until 2015-16.
“Swan will rob rich Peter to pay poor Paul,” said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney. “The rivers of gold from the commodities boom flowing through the economy are well and truly over.”
The economists’ survey predicts Swan will also forecast budget deficits of A$58.5 billion in 2009-10 and A$60 billion in 2010-11. The economy will contract 0.3 percent in 2009-10, they forecast.
Treasury has said the government will have to borrow as much as A$200 billion through the bond market to fund deficits until 2015-16.
Tax Breaks
Swan has already signaled he will halve tax breaks for high-income earners contributing to pension funds and slash their government subsidy for private health insurance. At the same time, he’ll deliver extra help for families earning less than A$150,000 a year and increase payments to aged pensioners.
Still, income-tax cuts for people earning between A$80,000 and A$180,000 scheduled for the two years starting July 1 will go ahead. The cuts were part of A$23 billion in cuts announced in last year’s budget.
“Everybody in Australia has to do their bit and some people have the capacity to do a bit more,” Swan told reporters in Canberra today.
Swan’s imposts on high-income earners mirrors steps in the U.S. and the U.K.
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Monday, May 11, 2009
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