Federal Treasurer Wayne Swan slashed spending last week in a bid to meet the minority-Gillard government’s promise of a surplus. Swan has promised to deliver a thin Budget surplus of $1.5 billion next year, a promise that has been jeered at by the Coalition, naming it a “hoax”.
In the Mid-Year Economic and Fiscal Outlook (MYEFO), Swan slashed the baby bonus, cut subsidies to HEX, increased visa charges and cracked down on tax breaks to plug the deficit hole made worse by the situation in Europe.
Mr Swan was forced to revise the current year deficit by more than $10 billion, with the government’s debt growing from $22.6 billion to $37 billion.
“Labor is all talk and no action when it comes to delivering a Budget surplus. This year was meant to be the year of decision and delivery,” Mr Hockey said.
“Instead it’s been a year of economic confusion, wasteful spending and failure to deliver.”
Mr Hockey is doubtful Wayne Swan can turn a $37 deficit around in just one year despite the Eurozone crisis and a downturn in China.
“The wafer thin forecast surplus for 2012-13 does not leave Australia prepared for future economic shocks.”
Here’s a quick summary of how Swan plans to deliver the surplus:
The baby bonus was decreased by $400 and both Swan and the Finance Minister Penny Wong have been busy defending the decision in the days since. Parents with babies born from September 2012 will receive $5000 and any annual increases to this amount have been frozen for three years but the paid-parental leave will remain the same.
The Opposition Leader, Tony Abbott has said the cut to the baby bonus demonstrates that Labor “has never had much respect for the stay-at-home mums of Australia.”
In a positive for Australian taxpayers, some visas for non-residents will have their charges upped, meaning the average taxpayer will no longer be subsidizing the applications. This will save $613 million.
The public service won’t be happy with a one-off increase in the efficiency dividend demanded of departments that will raise $1.5 billion but possibly cause job losses and service reductions. Ms Wong tried to calm reactions to this, stressing there will be no redundancies as a result of the efficiency dividend and urged departments to cut consultancies, advertising and travel costs.
“Given the tight fiscal conditions and future budget pressures, it’s increasingly important that the public service continues to play its part,” Ms Wong said.
The Depended Spouse Offset available to spouses without children has been changed, with only people born after 1952 eligible. This will save $370 million.
University spending has been splashed, with them set to lose $240.8 million in funds design to award learning outcomes. On top of this, students studying maths, statistics and science will face increased fees, with fees almost doubling from $4691 to $8353.
Independent MP Rob Oakeshott has pledged to fight the cuts to higher education funding.
“Any cut to higher education funding, at a time when Australia’s long-term strategy has education and innovation at it’s heart, is a concern, and I will be expressing this in the strongest terms to the Prime Minister and Treasure, as well as looking for a review of this decision,” Oakeshott said.
“This is $300 million that matters for the university sector, and matters for the national interest in the long term. If we want more boom and less gloom in the long term, this decision must be re-considered.”
A positive from the spending cuts was the dumping of the controversial, failed Malaysian people swap that will save $70.9 million. Another $216.4 million will be saved through dropping plans to increase Australia’s refugee intake by 4000 places.
But while voters may be angry about the spending cuts and the deficit, the economics rating agencies seem to believe Australia is heading in the right boat. On the same day as the budget-review announcement, Fitch upgraded Australia’s foreign economic issuer AA+ rating to AAA. Fitch joined Standard & Poor’s and Moody’s in awarding Australia the highest rating.
How have the spending cuts affected you? Is getting back to surplus as important as Wayne Swan and Julia Gillard believe? Let us know what you think, comment below or email us at email@example.com