Wayne Swan’s return to surplus, if achieved, will be off the back of the first reduction in spending since the 1970s, with government payments forecast to fall $6 billion and 1.6% of GDP next year.
The government claims to have found an additional $4.4 billion in savings next year and $32.6 billion over forward estimates.
But typically for this government, the big “savings” are tax increases:
- The 1% corporate tax cut linked to the mining tax has been ditched after the Greens and the Coalition blocked it, yielding $300 million next year but $4.8 billion over four years
- Changes to superannuation concessions for high income earners will provide around $2.4 billion, including just under $600 million next year
- Further overhauls of the living-away-from-home allowances for foreign workers is worth another $1 billion
- The axeing of the planned standard deduction for taxpayers will do little next year but eventually yield $2.1 billion
- The 50% tax discount on interest income will also not go ahead, producing more than $900 million
- An increase in heavy vehicle road user charges ($700 million)
- Duty-free tobacco excise (“cigs up”) $600 million.
The few genuine spending cuts have fallen in areas like:
- Defence: savings already announced will yield $5.4 billion
- Foreign aid: deferring the scheduled increase a year in foreign aid will yield $2.9 billion
- Welfare: the foreshadowed cut to parenting payment — $658 million.
The primary spending discipline is simply not increasing expenditure in many areas, normally a difficult feat for governments and grounds for not wholly dismissing the government’s claims to have made savings. Spending will rebound strongly in 2013-14, suggesting deferral of measures, but most of those occurred in MYEFO, which also brought considerable spending forward into the current financial year, making the fall next year (4.3%) all the more dramatic.