The Rudd Government has made infrastructure, retirement incomes and clean energy the centre of the 2009-10 budget, but the promised assault on middle class welfare is a low key affair. While the Government has promised $1.5b in savings next year and much more over the following four years, the big gains come from superannuation changes, means-testing of the private health insurance rebate and tightening of the taxation and family tax benefit system.
Wayne Swan has produced a lower-than-feared deficit of $53.1 billion that is still nearly 5% of GDP, based on an economy that will bottom during the year and average -0.5% growth, and unemployment of 8.25%, but, optimistically, ride a global recovery back to higher growth in later years. The Government will become the highest spending in Australian history, taking expenditure to 28.6% of GDP on the back of a massive road and rail investment program, a multi-billion dollar clean coal and solar technology fund, more educational investment — all funded from the Government’s investment funds — and a substantial lift in the pension rate.
The impact of the global downturn on revenues has also significantly worsened, with the Government downgrading receipt forecasts by a total of $210 billion, matching the revenue boost delivered by the minerals boom in recent years. The write-down of revenue means the deficit for the current year has blown out from February’s estimate of $22 billion to more than $32 billion.
Wayne Swan’s mantra will be the one he repeated at his press conference this morning — “jobs, nation building and a path back to surplus”, with the Government stressing the employment impact of its “early and decisive stimulus”, a massive infrastructure program and detailed assurances of a return to surplus by 2015-16 on the back of higher-than-usual forecasts for levels of growth as the economy recovers from recession.
This is a Budget very much of a piece with the Government stimulus packages so far: heavy emphasis on infrastructure, more cash handouts via pension increases and the scheduled tax cuts, but this time coupled with a relatively mild attack on superannuation concessions, private health insurance and some fiddling — albeit highly remunerative fiddling — at the edges of family tax benefits and the tax system. It will deliver a substantial stimulus into the economy in 2009-10, but only make a start on the more longer-term challenge of paring expenditure back to sustainable levels.