Tax cut slashed from budget

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Climate Change Minister, Greg Combet, announced yesterday that the Federal Government will defer indefinitely $1.4 billion in tax cuts which were set to be introduced in 2015 to compensate for the carbon price.

These cuts were to be achieved in 2015 by lifting the tax-free threshold from $18,200 to $19,400 and to be funded by revenue raised from the carbon tax. Original modelling for the carbon tax was based on a forecast of $29-per-tonne for the price of carbon by 2015-16, but with the European price crashing to below $5 per tonne, this figure has been revised down to $15 leaving the Federal Government scrambling to fill a $3 billion revenue void.

While the tax cuts have been deferred and not scrapped, Fairfax newspapers are reporting that Mr Combet said the tax cuts will be reinstated once the international price of carbon passes $25.40, which doesn’t look likely in the foreseeable future.

This announcement comes just days after the Finance Minister, Penny Wong, confirmed the Federal Government would not go ahead with the promised boost in family payments under Family Tax Benefit (A).

Read more from The Australian.
Read more from The Age.

What happened to conservative predictions?

Just days out from the Federal Budget, the Federal Government has been embarassed by another promise broken as a result of irresponsible modelling.

With the Federal Budget to be released next Tuesday, one can only imagine the panic in the Labor ranks around the country, with Wayne Swan counting the numbers and suggesting last-minute measures to make the books look more respectable. This panic is a direct result of a $17 billion shortfall in revenue due to errors in Treasury modelling.

Taking a look back at the $29-per-tonne forecast for the price on carbon as a prime example, there is nothing conservative about this prediction. From January 2008 when the European price on carbon was trading at over €20 per tonne, the markets saw a small rise and then a consistent fall in the price, trading at just €6.76 per tonne in December 2010 and hitting a record low of €2.81 in January 2013.

How can the ‘experts’, i.e. Treasury and the government of the day, get it so wrong? If we look back to May 2010, Wayne Swan promised to bring the budget into surplus by 2012/2013. He continued to tell this story alongside Prime Minister Julia Gillard until just five months ago when they realised attempting to have a surplus for the sake of a surplus was irresponsible and totally unrealistic.

I am involved in modelling of budgets for online marketing campaigns for YOURLifeChoices and when I present my figures for campaign approval, I submit three versions. A conservative figure (one which I know can be achieved under any circumstances), an expected figure and a best-case figure. Perhaps the government should take a page out of my book and start with realistic modelling, otherwise we may find ourselves in a similar position in 12 months time.

Do you think the current Federal Government can manage a budget? Are they over-promising and under-delivering? 

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Written by Drew

Starting out as a week of work experience in 2005 while studying his Bachelor of Business at Swinburne University, Drew has never left his post and has been with the company ever since, working on the websites digital needs. Drew has a passion for all things technology which is only rivalled for his love of all things sport (watching, not playing).
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130 Comments

Total Comments: 130
  1. 0
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    Hi Drew, I have worked on many a budget and please note Wayne Swan has not been right once.I don’t believe he is giving us a true picture on th situation, it will take us forever to come back to a surplus, not in my lifetime anyway. He keeps on trying to tell us how great he is and that it is the gfc. I say the coalition left us in surplus, and Peter Costello made sure that the banks were safe not like other countries, he has put through programmes without thought and the $900 he gave me i saved. With regards super Peter Costello banked asset sales in the future fund, Mr. Swan has not put one cent into this fund since in power i could go on and i know i am going to get flack from the rather large labor posters on this site so here goes.

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      To Sensible Senior…….I could not agree more with your comment. You certainly won’t be bagged by me, but I know there are many out there that will always vote against the Liberals no matter how much the current government makes a mess of things. Another day another stuff up. Bring on the election !!!!

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      Hi Sensible Senior. You seem to have forgotten that the banks ‘were government garuanteed’ by Rudd. His spending on pensioners (12 years of Howard and not a cent increase (please don’t mention ‘cost of living adjustments as a pension increase because even Minister Amanda Vanstone said you couldn’t even buy a milk-shake with the CPI indexation!) flowed through the economy and saved the economy from the fear gripping the world economy as a result of the GFC. Australia missed the bullet with which other OECD countries are still struggling with.

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      robbie the banks did not need to be guaranteed by rudd and dont give me his increase for pensioners he did away with the bonus and incorporated the utilitiy allowance which i believe was approx 250 dollars a year. australia missed the bullet because we were left with a surplus by the coalition. the oecd countries are struggling because they did not secure their banks. god forbid if we have another gfc we would be like all the other countries. and another point kevin rudd was pushed my malcolm turnbull into giving that increase in pensions, pity julia gillard did not do the same for newstart, unemployment, etc.

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      Robbie this man above Mr. Combet was asked to front the enquiry on the so called training by Maitland where Combet gave him his approval

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    As I understand it Government revenues have increased 30 per cent whilst Labor have been in power so it not a case of revenue being short but spending being out of control.
    Now by legislating for future spending Labor is leaving a legacy to future governments I.e taxpayers to bear the burden.
    It’s easy to be the hero on education disabled and defense if you know you won’t be around to pick up the tab.

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      Dear Pete. Taxpayers bore the brunt of the two wars Howard got us in (Iraq & Afganistan) but you seem to have forgotten those. You also forgot to mention the first pension increase in twelve years from the ALP government in Canberra, the spending of which reinvigorated the Australian economy as a result of events happenings overseas. Economies are a state of mind and as such are much given to fear i.e. 126 billion US$ wiped out in three minutes due to a false rumour that President Obama was injured by an explosion in the White House: not true. Mr Murdoch’s glove puppet: Tony Abbott has done his best to talk the economy down these last three years. If the economy slows down it’s because people are frightened of an Abbott PM ruining the economy with his $75,000 baby bonus which this country can’t afford. The levy on bussiness will be passed on to the tax payers. Any other policies from Abbott? I won’t hold my breath!

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      Well we can go into the money wasted by both governments I for instance do not agree with the family bonus brought in by Howard. and think this money better spent on the real needy pensioners and the disabled. Abbott has already released some policies including paid parental leave which I also disagree with. But compared to labor these guys are misers it seems and aqutreck has the numbers that it takes four to five years for the conservatives ( how I wish they were ) n power for the economy to recover from the socialists spending spree.

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    Most definately. Nothing will be achieved in Australia this year…it is an election campaign and they are just trying to sucker us in! I reckon I could manage budget better, plan for future better. I resent their huge pay packs and lifetime rewards when Aussie battlers are suffering. They have no idea what the real Aussie is.

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      HOW DARE THESE OVERPAID ALPS TELL US TO TIGHTEN OUR BELTS WHEN THEY ARE LAUGHING ALL THE WAY TO THEIR BANKS……….

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      Dear ekbg2002. You have never looked closely at what politicians do have you? I don’t suppose you know any either? Politicians work very hard under very trying conditions, but you probably don’t know any and you wouldn’t know this! As for Aussie battlers: when was the last time that interest rate were this low? The Australian Economy has GROWN 30% since Labor came to government. How much bigger, faster and more robust does the economy have to grow for the ‘Aussie Battlers’ to appreciate?

    • 0
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      robbie how much has the expenditure grown by.

  4. 0
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    Sensible Senior I could not agree more. It is well known that Labor cannot manage money. It would surprise me if the $17B remains that low. The election cannot come soon enough!!

  5. 0
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    Having drawn up many budgets in the past, the first thing I always did was put down what I had spent on various things during the last financial year (obviously not the one we were in, as it hadn’t finished yet). I then reviewed it all, looked at how things were going this year and then came up with predictions for what I would need next financial year. I then waited to be told how much I was going to be allowed to budget and then went back and “massaged” my figures until they fitted this overall total. Not very complicated, but apparently beyond the capability of our current Treasurer. Let’s hope the next Treasurer is substantially better – even though the result of his budget will inevitably be painful for all of us!

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      Dear Sapper. If by the next Treasurer you mean David Hockey, I wouldn’t think the IMF would give him a gong as treasurer. When he says that proposed tax cuts and largesse from the Federal Government had to be posponed because of the changing circumstances of the global economy, he said people were robbed! Does that sound like circumspect language for a proposed treaurer to be? Think not!

    • 0
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      Robbie who is david hockey

    • 0
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      I think he is a painter SS

  6. 0
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    I too have been involved in the supervision of budgets for large businesses and with the best of intentions, some factors can be unpredictable.
    However, to get it so wrong repeatedly as this mob has, should prove to even the most dyed in the wool labor voters that they are simply incompetent, and always have been.
    They have been feeding us spin for so long but sooner or later the truth comes out and as Dame thatcher said “the trouble with Socialists is that sooner or later they run out of other peoples money to spend” It has been our money that they have squandered.
    Australia Inc is a business and you need business acumen not the experience of running a trade union, being a social worker, or being a lawyer (even one with some uncertain history)
    Perhaps the labor stalwarts finally agree as they are not flooding this blog with their leftist dogma as they usually do.
    Time to go

    • 0
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      Dear retroy. The trouble with Thatcher is that her legacy is still haunting Brittain today. Prime Minister Cameron is stuck trying to get the British economy going. Have you seen the British Government debt? Have you followed the destruction of the British economy under Thatcher? Conservatives give the billions of pounds in stimulus to the banking sector who sit on tax payers money: not lending it out as they should have. Look at what Japan has done after more than 20 years of stagnation. They are printing money and mandating a 20% increase in wages to get spending flowing through the economy. Don’t hold your breath for the conservatives to do the same under Abbott.

    • 0
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      The UK is following the same pattern as Australia . The conservatives go in and repair the damage done by Socialists this normaly takes four to five years.
      Unfortunately the Conservatives are restrained by the uk Liberals.
      However with the recent stro g showing by the UKIP maybe now they will get some backbone. Otherwise Cameron look out Boris is on the prowl.

  7. 0
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    Perhaps there is something in the old saying ” if you are not left when you are young you have no heart if you are not right when you are older you have no head”

    • 0
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      Dear Pete. Why is it that people on the Left care about education: disability support: the environment: social security, whilst people on the Right care about only themselves? ‘Them & Us’ comes from the Right. ‘No such thing as Society’ said Thatcher. I prefer a heart to a head of stone.

    • 0
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      You obviously don’t know the size of telephone boxes. Newman will be a ‘once only’ term government. You don’t know too many Queenslanders. The drop in Newman’s popularity was the greatest drop in Commonwealth history. Do you think people will overlook this when the election comes around? Wait till privatisation hits them when he said he wouldn’t go down that road! Like all conservatives: ‘Say one thing” do another’ just like Tony Abbott will do. We live in interesting times!

    • 0
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      The people on the right care about education disability support the environment
      The elderly and anyone in need .
      But we would like to get our money as close to the problem as possible. So we are against large distant beurocracies against five year plans for pragmatism over ideology. And abhor waste of public monies. and celebrate the individual over society as Maggie said .

    • 0
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      it is health that is the wealth not gold or silver

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      Robbie i live in Queensland and what Anna Bligh and her labor party did to this state was criminal. Money donated by the floods was not completely passed on, sale of assets, 62 billion in the red. I admirfe Campbell Newman for taking the stand he has done and look at your sneaky government come up here bragging about what they are going to do with regards rail and only putting in 25% towards it, the rest to come out of the g.s.t. that the state gets. Albanese,Rudd and Swan should hang their heads in shame how they spruiked on television about the state government.

  8. 0
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    ALP supporters – not a one in sight [txt] ? Oh I know – they are all busy on FaceBook hitting the like button demanding that Juliar resign. Whats the point of just Juliar leaving – what about the rest of the rat pack ?
    https://www.facebook.com/AlpSupportersWhoWantJuliaGillardToResign?hc_location=stream

    It always takes about 4-5 years to claw back to sensibility after the ALP have raided the coffers and committed any following government to attempting to figure out how to pay the huge debts off – if that hadnt been done in the past then Oz would have been another basket like the PIGS group of basketcases – Spain 25% unemployment !! [throw in Cyprus for good measure].
    http://www.tradingeconomics.com/australia/government-budget
    set the year to 1979 and click on refresh -its obvious [I have matched ALP governance with each massive dip into a budget deficit]

    • 0
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      Dear aquatrek. Fancy mentioning Spain, Cyprus etc… All these governments have conservative governments. They have done what conservative economists advised. Cut spending: government services; slow everything down till their economies crash. This is what Hockey advises. Cut the public services sector. Make unemployment rise (how do you pay off debt when unemployed?) Just see what Newman has done in Queensland! Not intersted? You will be when Costello’s advise to Abbott is to do the same! Then see our AAA rating disappear. Pain will come to this land. So sad and avoidable!

    • 0
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      you obviously cannot understand graphs – its a linear picture of income versus outgoings – its called a budget – so that is the saddest part. What Newman has had to face is exactly the same scenario – a state driven to bankrupcy by an ALP spendthrift. If everyone ran their household budgets like the ALP we would all be on the streets selling hashish. Just look at the graph look at the graph look at the graph – get it ?

    • 0
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      It must be very lonely being a socialist these days Robbie there can’t be any room in that Queensland phone box

    • 0
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      ALP CRIME ENDEMIC – WOW Newmans commission of enquiry has unearthed some real dodgy stuff with Ludwig, RQL and others. ALP = corruption personified.

    • 0
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      A question on Newman’s commission of enquiry? I do believe it was Peter Costello so could one possibly expect a balanced view from him? He probably did what Kennett did when he came to power in Victoria. He took the debt being adequately serviced by State Instrumentalities each one of which was also paying annual dividends into State Coffers and rolled into the actual State Debt. The enquiry Commission was made up of surprise surprise all Liberal party members.
      A huge gnashing of teeth followed quoting this massive State debt but of course the bulk of that debt was being adequately serviced in the way any business would do it.
      Talk about smoke and mirrors not to mention lies and deceit.

    • 0
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      you are a classic case Tom Tank – when you have run out of reality you start with the ‘he probably did’ ALP spin doctoring.

  9. 0
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    AFTER THIS LAST FARCE ONE WONDERS WHOSE NOSE IS GETTING LONGER BY THE DAY?????

    • 0
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      Dear Lenyac. Whose hand is up the glove puppet Tony Abbot? Murdoch! Who will benefit from Murdochs protoge? The elite. Who will suffer from Peter Costello’s advise: the Australian tax payers. Then tell me whose nose is getting longer!

    • 0
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      We should be very proud of Murdoch he has created a world wide business from one newspaper in Adelaide .
      He created the only seriouse newspaper in Australia and has consistently lost money on it .
      Wasn’t it Kevin Rudd who got pissed in a new York strip joint with a news corp exec
      After a meeting with mr Murdoch

    • 0
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      Dear Lenyjac. You must watch the next episode of ‘Murdoch’ this Sunday evening on the ABC at 8.30pm. After vyou have seen it tell me you are still proud of Murdoch. If you are hearing impaired, put on the sub-titles. Surely you can comnprehend what one man do with 74% of the Australian media under his control. He will determin who will be Prime Minster and the condition under which he will rule!

    • 0
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      Well let’s think I get my news from the economist the spectator the Australian
      And for a bit of left wing bias I watch ABC and read SMH a Fairfax rag I do all of this
      On my iPad and get google news
      Mr Murdoch has an interest in only one of these the Australian and has lost money on it fairly consistently since the sixties
      I would be interested to know how you arrive at 74 per cent

  10. 0
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    Who was that famous person who said: “You can fool all the people some of the time, you can fool some of the people all of the time but you can’t fool all the people all of the time” ?

    Figures and budgets apart, I think Julia’s brand of Labour assumes most Aussies are gullible fools.

    They say no political party has ever won an election by promising more taxation.

    The election will clearly show who the fool really is

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