Aussie Budget lacks election-year look

Wayne Swan. Photo / Mark Mitchell

CANBERRA - Federal Treasurer Wayne Swan is giving every indication his May Budget will be very different from those of past election years.

"This is not going to be some John Howard pre-election Budget full of handouts," he told Sky News from Washington. But the treasurer did commit the Government to income tax cuts flagged in his and the Howard government's previous Budgets.

"Tax cuts will be delivered as was promised," he said.

The Government is likely to use Treasury figures which show working families are nearly A$4000 ($5160) a year better off under Labor to justify an end to the annual Budget expectation of tax relief and increases to family benefits.

Instead, it wants to limit new spending to infrastructure projects and the A$5.4 billion in inducements Prime Minister Kevin Rudd last week offered the states and territories to win them over to his health reforms.

Swan says the Government will manage that additional spending within the fiscal rules it has set itself to reduce the budget deficit and accumulated debt run up during Labor's response to the global financial crisis and recession.

"We are serious about implementing our strict fiscal rules which put a 2 per cent cap on spending," he said.

That means spending cuts across the board, a position Finance Minister Lindsay Tanner outlined last week when confirming the Government would use better-than-expected tax revenues to reduce the deficit and pay down debt.

Swan said the Government had a proven record in finding savings with more than A$56 billion from its first two Budgets.

Half that amount plus better tax revenues, coupled with savings in under-utilised unemployment benefits, will wipe out the Government's forecast deficit of A$31.2 billion.

That's a prospect being flagged by some in the finance sector, but ruled out by the Government's senior finance ministers.

The effect on government debt would also be dramatic with net debt topping A$75 billion instead of the A$153 billion forecast at the time of the Mid-Year Economic and Fiscal Outlook in late 2009.

It appears Labor is banking on voters giving it more credit for management of the economy during a global downturn than offering them monetary inducements.

- AAP