Prime Minister Julia Gillard has announced a $12 billion revenue hole
Prime Minister Julia Gillard has warned Australia to “prepare for pain” as she announced a $12 billion revenue hole two weeks before the budget is due to be announced.
Ms Gillard has made it clear that the current 10 per cent GST will not increase to fill this gap, but has signalled that there will be big changes to taxes and spending. One major change being considered is to the Medicare levy, increasing it from 1.5 to 2 per cent. Increasing the Medicare levy was originally proposed as a way to fund the new DisabilityCare scheme.
During her speech to the country, Ms Gillard stated that all options were “back on the table”. The Opposition’s spokesperson on the economy, Joe Hockey, has commented, “all options are on the table, so increased tax on superannuation, increased taxes on the family home, death duties, which Wayne Swan ruled out in Parliament – all options are on the table.”
Ms Gillard’s proposal to reconsider previous decisions will open the way for other changes to the budget, including increases in the capital gains tax on the family home, changes to superannuation and to the private health insurance rebate.
The Government has blamed the strong dollar and lower than expected returns from the mining tax as major reasons for the missing $12 billion.
Read Prime Minister Julia Gillard’s speech in full on The Age website.
Find out more about possible tax reforms at the Brisbane Times website.
When all else fails, try honesty. This seems to be the realisation the Government has reached, as it finally confessed to the less-than-stellar outlook for the upcoming budget.
In October last year it became clear that revenue was falling short of projections, but instead of admitting they might not make the promised budget surplus, the Government produced a budget update which used a few one-off payments, such as making some quarterly company tax payments monthly, to fabricate a wafer-think ‘surplus’.
In December Treasurer Wayne Swan admitted the futility of cutting costs simply so he could announce a surplus and instead explained this was one election promise the Government would not be able to keep. Now, two weeks before budget night, it turns out there’s a $12 billion hole where once we had spending money.
If it sounds like I’m criticising the way the Labor Government is running the country, I’m not. I think they’ve brought in some pretty fantastic reforms which are, unfortunately, being overshadowed by the upcoming budget. I do, however, think that they handled this issue very poorly. If they had told us about these financial difficulties back in October, instead of trying to cover them up like guilty children, we would all be over it by now. We, the thinking Australian public, would have accepted that economies rise and fall and moved on with our lives. In fact, we might even be talking about some of the important issues facing our country right now, such as education or aged care, instead of waffling about whether or not the budget is going to be everything the Government was hoping for (and really, is it ever?).
The International Monetary Fund (IMF) estimates that, excluding Asian countries where welfare is left to families, Australia has the second lowest spending of any Western country, behind Switzerland. Australia is the sixth-lowest taxing country in the Organisation for Economic Co-operation and Development (OECD), an international group of 34 countries. Our taxes are at about 27 per cent of Gross Domestic Product (GDP) as of 2011, whereas the average in the OECD is around 35 per cent.
That says to me that perhaps the reason the Government is running out of money is that it is trying to implement better facilities and services without raising the taxes, because in Australia raising taxes is very much like handing the next election over to the Opposition. We pay very little compared to other countries and yet we expect, at least, the same levels of education and healthcare which they enjoy.
I think that, for once, we should stand behind a government with the guts to raise taxes. If a government came out tomorrow and said ‘we are going to raise taxes for those who can afford it, in order to improve services for everyone in the country’, then I would applaud their forward thinking.
Are you worried that the $12 billion budget hole is going to affect you? Do you think we should pay more taxes, or is the Government just making a grab for money it shouldn’t have spent?
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