Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/sp/article/2008/200811/20081106/article_379570.htm
Taxing times for Aust
Created: 2008-11-6
Author:Madelene Pearson
AUSTRALIA'S government has slashed its forecast budget surplus by 75 percent, saying the slowest economic growth in eight years and fallout from the global financial crisis will erode tax revenue.
The cash surplus in the year to June 30, 2009, will be A$5.4 billion (US$3.8 billion), compared with A$21.7 billion forecast in May, as revenue falls and the government gives cash handouts to families, pensioners and home buyers, Treasurer Wayne Swan said in Canberra yesterday. The economy will grow 2 percent compared with a May prediction of 2.75 percent.
The central bank has cut the benchmark interest rate by 2 percentage points since September, the most aggressive round of reductions since the recession of 1991, Bloomberg News said.
Recent reports show house prices fell by the most since 1978, building approvals had the biggest drop in two years, the services industry shrank for a seventh month and retail sales contracted as Australia's 17 years of economic growth comes to an end.
However, unlike in the United States, Australia does not plan to borrow to finance a fiscal stimulus package it has introduced to protect the economy in the face of the global market turmoil. The US had a record US$455 billion budget deficit in the 12 months ended September.
Swan has also been forced to slash his budget surplus after an October 14 promise to give pensioners, home buyers and families A$10.4 billion in handouts to boost the economy. Bank deposits and "wholesale term funding" have also been guaranteed, with the government ready to do more should the need arise.
The cash handouts came on top of the biggest income-tax cuts in history, delivered in the May budget, which the government said would add A$5.1 billion to consumer spending in 2008-09. Household spending accounts for two-thirds of the A$1 trillion economy.
The global financial crisis is forecast to reduce revenue from taxes by around A$40 billion over the next four years, Swan said.
The cash surplus in the year to June 30, 2009, will be A$5.4 billion (US$3.8 billion), compared with A$21.7 billion forecast in May, as revenue falls and the government gives cash handouts to families, pensioners and home buyers, Treasurer Wayne Swan said in Canberra yesterday. The economy will grow 2 percent compared with a May prediction of 2.75 percent.
The central bank has cut the benchmark interest rate by 2 percentage points since September, the most aggressive round of reductions since the recession of 1991, Bloomberg News said.
Recent reports show house prices fell by the most since 1978, building approvals had the biggest drop in two years, the services industry shrank for a seventh month and retail sales contracted as Australia's 17 years of economic growth comes to an end.
However, unlike in the United States, Australia does not plan to borrow to finance a fiscal stimulus package it has introduced to protect the economy in the face of the global market turmoil. The US had a record US$455 billion budget deficit in the 12 months ended September.
Swan has also been forced to slash his budget surplus after an October 14 promise to give pensioners, home buyers and families A$10.4 billion in handouts to boost the economy. Bank deposits and "wholesale term funding" have also been guaranteed, with the government ready to do more should the need arise.
The cash handouts came on top of the biggest income-tax cuts in history, delivered in the May budget, which the government said would add A$5.1 billion to consumer spending in 2008-09. Household spending accounts for two-thirds of the A$1 trillion economy.
The global financial crisis is forecast to reduce revenue from taxes by around A$40 billion over the next four years, Swan said.
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