There’s a stream of bad news this morning for the Australian federal government budget balance.
There are reports of a scramble for yet more savings programs, revenue shortfalls including Rio Tinto not being liable for resources tax, and a potential NBN cost blowout.
The AFR reports that ministers will be looking another $6 billion in savings that has been lost since the budget was delivered just over two months ago.
With the government already having announced a $3.9 billion change to fringe benefits tax to fund its just-announced border protection policy change involving sending boat arrivals to PNG, and billions in cuts already made in recent years under Wayne Swan, the talks on more savings are said to be “stressful”.
The Fin reports that “company tax, capital gains tax and income tax receipts well below what was expected two months ago”.
Over at The Australian, it’s reported Rio Tinto has decided it won’t be liable to pay any resources tax this year. This is expected to put pressure on the modest forecast of $700 million in revenue this financial year from the tax, which has been repeatedly downgraded in terms of expectations and failed to raised a single dollar in its first year of operation.
And the paper also reports that the NBN could face a cost blowout in the order of $20 billion or more, with contractors expected to be asking for pay increases of 20-40% in contract renegotiations over the coming years.
Newly-installed federal Treasurer Chris Bowen is widely regarded as a good ministerial performer but he is facing an extraordinary challenge to outline how he will return the budget to surplus over time.
An update on the budget bottom line will be released ahead of the election and it’s expected to be grim. Both sides of politics will need to have answers for voters.
Perhaps they might look to the PwC report out this week which says that the problems are more than simple over-spending and missing revenue expectations. It says Australia needs structural tax reform to avoid deficits totally over $500 billion by 2050.
“The Australian governments risk not being able to meet the key needs of our community and a further slide into debt.”
But you wouldn’t be holding your breath for any major tax reform proposals between now and the election.