Australia aims to nearly halve budget deficit

Staff Writer
Columbus CEO

CANBERRA, Australia (AP) — Australia's government said Tuesday it will nearly halve its fiscal deficit as part of a tough budget that includes tax hikes, less welfare and the layoff of more than 16,000 state employees.

The financial blueprint for the fiscal year starting July 1 is forecast to reduce the budget deficit to 29.8 billion Australia dollars ($27.8 billion) from AU$49.9 billion in the current fiscal year.

Defense spending has been quarantined from the cuts, with specific money allocated for the ongoing search for the missing Malaysian airliner.

Growth in the foreign aid budget will be slowed to save AU$7.9 billion over five years. The Australia Network, a television service broadcast into Asia as a soft diplomacy measure, will be axed to save AU$77 million.

Over five years, the government also plans to spend AU$11.6 billion on infrastructure such as roads, railways and a new Sydney airport to fill the economic void left by the end of Australia's mine construction boom.

The spending includes AU$5 billion of incentives to encourage state governments to sell assets and invest the proceeds in new infrastructure. The government expects such incentives could help create AU$40 billion in new infrastructure.

The government is also considering selling some of its own assets, including the Australian mint, which produces coins for Australia and some foreign governments.

"The age of entitlement is over," Treasurer Joe Hockey said in announcing the budget. "It has to be replaced, not with an age of austerity, but with an age of opportunity."

Prime Minister Tony Abbott's conservative government was elected in September with a promise of no new taxes. Critics say he is breaking that election pledge with a 2 percent levy to be paid for three years by Australians earning more than AU$180,000 a year. The levy would raise AU$3.1 billion.

A gasoline tax that was frozen at 38.1 Australian cents (35.7 cents) per liter since 2001 will be indexed to inflation twice a year.

Pension increases will also be linked to inflation instead of faster-growing wages from 2017, saving the government AU$449 million over five years.

Unemployment and family welfare payments will be reduced, companies will lose AU$845 million in industry assistance programs, 70 government agencies will be abolished and 16,500 public servants will lose their jobs over three years.

"A smaller, less interfering government won't need as many public servants," Hockey said.

Unemployment is forecast to increase from 6 percent to 6.25 percent and economic growth to slow from 2.75 percent in the current fiscal year to 2.5 percent.

Hockey said he would have made more immediate budget cuts, but he did not want to detract from growth which was already slower than the long-term average of 3.25 percent.

The government will need the support of opposition and minor parties to get some of the more contentious measures through the Senate and might have to make compromises.

The government is continuing with its plans to repeal taxes on mining industry profits and on major industrial polluters for their greenhouse gas emissions, despite the opposition Labor Party and Greens party blocking the moves in the Senate.

In other measures, Australians who pay nothing for their government-subsidized visits to doctors will have to pay AU$7 for each visit.

Most of that money would be used to pay for a new national medical research fund that is forecast to be worth AU$20 billion within six years.

Despite the welfare cuts, Abbott plans to proceed with his contentious policy to provide paid maternity leave of AU$50,000 for six months to women earning AU$100,000 a year or more. Mothers earning less would also be paid taxpayer-funded maternity leave at the same rate as their salaries.

The Defense Department was a big winner in the budget.

The government brought forward AU$500 million earmarked by the last government for 2017-18 to the current fiscal year, bringing annual defense spending to AU$27.1 billion. The extra funding will help pay for new Boeing EA-18G Growler fighter jets, Romeo Naval anti-submarine combat helicopters and an upgrade of the navy's long-range anti-aircraft missiles.

Defense funding will increase by almost 8 percent to AU$29.2 billion in the next fiscal year.

Australia is leading the search for missing Malaysia Airlines Flight 370 which is thought to have disappeared in the Indian Ocean on March 8 with 239 passengers and crew aboard.

Australia's military spent AU$25 million on the search in the current fiscal year and allocated another AU$3 million for the continuing search in conjunction with Malaysia and China, according to budget documents.

The government has budgeted AU$90 million for the search in the current and next fiscal year. But the documents note that the actual cost will depend on a numbers of factors, including the cost of underwater submarines, the length of the search and the contributions of other countries.