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Budget preview: speculation, sweeteners and ‘tough’ love

It will be a “Labor budget”, the government says, “tough” for some but with relief for families, pensioners and low-paid workers.

As Treasurer Wayne Swan prepares to hand down his fourth budget — the first for Prime Minister Julia Gillard — Crikey summarises the stunts, speculation and sweeteners before delving into the papers …

THE ACCOUNTS:

  • The deficit this financial year is expected to grow to $50 billion-$51 billion, with a forecast $20 billion-$22 billion debt tipped for next year. The government will say it remains on track to return to a reported surplus of $3 billion in 2012-13.
  • Budget forecasts will bank on growth of at least 3.75% in the next financial year. (The Reserve Bank of Australia has predicted a more aggressive 4.5% growth spurt.)
  • The government will maintain its pledge to keep a 2% real spending cap in place until the surplus reaches 1% of gross domestic product.

TAX:

The government has already announced:

  • A $950 million increase in the taxable fringe benefits of company cars, scrapping the concessions that allow drivers to minimise their tax exposure by maximising travel in their vehicles. The move is expected to save $1 billion over four years. The opposition claims it will cripple small business and independent contractors, but the Greens welcome the environmental benefits.
  • The government will bring forward almost $1.37 billion in annual tax breaks to low-paid workers. Up to 70% of the Low Income Tax Offset, worth up to $1500, will be accessible as a weekly tax cut, of roughly $6 per week (Swan says withholding 30% of the offset will protect against overpayment).

HEALTH:

Mental health is expected to be among the big-ticket items. But initiatives will be framed around the government’s overriding agenda to increase workforce participation, with hundreds of millions of dollars to be invested in moving 800,000 recipients of the disability support pension into paid work. Initiatives are expected to include:

  • A new package of between $1.5 billion-$2 billion, with a commitment to build more early psychosis prevention invention centres and expand the national Headspace program. Ian Hickie, boss of the Brain and Mind Institute and a key government adviser, told ABC Radio the new money is “in the order of what we need”.
  • Places for 3500 children with autism will be created at early-learning centres, The Australian reports.
  • Social workers will be employed to keep the mentally ill in their homes, Mission Australia has been told. The NSW government-backed Housing and Accommodation Support Initiative will be expanded to assist.
  • A statutory commission will be established to “improve service design and address chronic waste” in mental health service delivery.

In other health initiatives:

  • The Australian reports “speculation that the $427 million four-hour emergency department treatment target in hospitals could be delayed”.
  • Further speculation that the $5.40 patient charge for subsidised prescription medicine would be increased has been quashed by the government, with the budget expected to maintain the discount.
  • Medical researchers are nervous about reported cuts to their funding of up to $400 million. The government has refused to rule any cuts in or out under pressure from the opposition; Liberal health spokesperson Peter Dutton says the Coalition is “going to the barricades over this one”.

EDUCATION/FAMILIES:

The Gillard government’s “earning or learning” mantra will be backed with family tax breaks and incentives to remain in school:

  • The Age reports a “stick” for teenage mothers to try to keep them in education.
  • There will be more generous support for families with older teenagers who stay at school, with as much as $4200 in family tax benefits. The $771.9 million program was leaked by the government last week.
  • Education tax rebates to cover school uniforms will also be extended for families who qualify for Family Tax Benefit A.
  • Gillard has confirmed bonus payments will be offered to the nation’s best teachers. The $425 million, four-year program — $1.3 billion to 2018 — will pay between $5400 and $8100 depending on experience. Up to 25,000 teachers are expected to receive the payments.
  • There is, The Australian says, speculation that a promised $222 million boost to school chaplaincy programs could be delayed.
  • University students will have discounts for up-front HECS payments slashed. A reduction by 10% will net the government $500 million.

EMPLOYMENT:

”What you’ll see in this budget is an emphasis upon Australians participating in the labour force and getting access to employment opportunities,” Swan said yesterday. The Treasurer has already pledged the budget will create 500,000 new jobs to drive the unemployment rate down from 4.9% to 4.5%.

The government’s “stick-and-carrot” approach to increasing workforce participation will take several forms, including:

  • The long-term unemployed (out of a job for more than two years, estimated at 230,000 people) will have the work experience they must undertake almost double, from two days a week for six months a year to 11 months of the year. The initiative will kick in on July 1.
  • Changes to the disability support pension to shift more recipients off welfare — a $13 billion annual government spend, almost twice unemployment benefits — are likely to start as trial programs, a source told The Age.
  • There are also expected to be budget initiatives to encourage older workers to remain in the work force. The Treasurer announced in March the establishment of an expert panel to advise on the economic impact.

Along with workforce participation programs, Swan is expected to announce a lift in skilled overseas migration to feed labour-hungry regional areas. “Our priority is to train Australians first,” the Treasurer said. “Now, of course, from time to time and in places in the country and in particular industries, there will be shortages that can’t necessarily be filled by Australians.”

  • The intake number under the Regional Sponsored Migration Scheme will rise by 6000 to 16,000 in the 2011-12 financial year, The Australian reported yesterday. Australian Industry Group chief executive Heather Ridout says that’s at the “lower end of what was needed”.
  • Elsewhere, there will be “significant funds to train and reskill the unemployed”. Regional Development Minister Simon Crean said late last month: ”The focus of the budget will be very much about skills development.”

INFRASTRUCTURE

The government has already pledged funding to key projects including:

  • $742 million for a long-awaited commuter rail connection in Brisbane between Petrie and the booming Redcliffe peninsula.
  • $2.1 billion for a 14-kilometre rail link in Sydney’s west between Parramatta and Epping (despite the newly elected O’Farrell government wanting the funding redirected to its own rail plan).
  • $275 million towards upgrading the Princess Highway West in Victoria.

COMMUNICATIONS:

The government will aid pensioners make the switch to digital television before analogue services are switched off:

  • Communications Minister Stephen Conroy announced yesterday that $308.8 million will come from the budget to fund digital conversion for two million homes, including the supply and installation of digital set-top boxes.

DEFENCE:

The Australian Defence Force will be asked to razor its civilian workforce, to meet an increased efficiency dividend of 1.5% in 2011-12 and 2012-13. The department has pledged to cut $20 billion from its budget over the next decade.

  • Defence Minister Stephen Smith announced yesterday plans for the ADF to hire an extra 1655 civilians over the next three years will be cut back to 655 additional staff to meet budget saving targets.

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