Australian Tax Revenue Down
05 August 2013
Posted by: Author: Mary Swire
Author: Mary Swire
Lower than expected economic growth has had a "major impact" on tax receipts, the Australian Government has admitted.
The latest Government Economic Statement details Australia's short- and medium-term economic outlook, the challenges ahead, and the manner in which it hopes to return to a budget surplus.
A joint statement issued by Treasurer Chris Bowen and Finance Minister Penny Wong notes "significant downgrades to tax revenue due to lower terms of trade, falling commodity prices and other factors." Personal and corporate income taxes, along with the minerals resource rent tax, have all suffered from weakened outlooks.
Projected tax receipts have now been revised down by AUD7.8bn (USD6.98) in 2013-14, and AUD33.3bn over the period to 2018.
Bowen and Wong were nevertheless keen to stress that the Government "has a clear path to return the Budget to surplus." Its short-term fiscal position "supports jobs", they said, and a new policy is being implemented "to lift productivity, economic growth and Australian living standards."
Nominal gross domestic product (GDP) has averaged growth of 6.5 percent over the past 20 years. It is now forecast to increase by just 3.75 percent in 2013-14, and 4.5 percent in 2014-15. Real GDP growth will stand at 2.5 percent in 2013-14, and the Government anticipates that unemployment will hit 6.25 percent. Things will pick up in 2014-15, with real GDP rising by 3 percent.
In the medium-term, the Government will aim at "largely absorbing the fall in forecast revenues, while charting a course for return to surplus to keep Australia's fiscal position sustainable," according to Bowen and Wong. They believe that seeking to offset the drop in revenue by introducing budget cuts would risk both jobs and growth, something they say the Government is not prepared to do.
Instead, "protecting growth, employment and essential services in the immediate future has meant the Government has allowed the downwards revisions in expected revenues in the short term to flow through to the budget balance." The Government anticipates that significant savings will take effect from 2015-16, which will offset slower growth in tax receipts and result in a "modest" deficit that year, and a "modest" surplus of AUD4bn in 2016-17.
Policy decisions taken since ex-Treasurer Wayne Swan's 2013-14 Budget was unveiled earlier this year should boost tax receipts by AUD1.1bn in 2013-14, AUD1.8bn in 2015-16, and AUD5.4bn in 2016-17. A series of hikes in tobacco excise rates, announced this week, will help balance the budget, and the Australian Taxation Office will be given an additional AUD99m over the next four years to address ongoing problems with tax debt and unpaid superannuation.
On the other hand, other recent moves will put a dampener on receipts. These include an earlier than planned switch to an emissions trading system from July 1, 2014, which will have a net cost to the budget of around AUD3.8bn over the forward estimates, in underlying cash balance terms.