Labor's cost-cutting plan clears decks for early poll

Labor has locked in its last major policy priority before the coming election, clearing the decks for a poll that could be held as early as the first week of September.

Although Prime Minister Kevin Rudd continues to keep the nation hanging, the release of a new economic statement yesterday raised speculation he might call a September 7 poll this weekend.

With the decision to accelerate the replacement of the carbon tax with an emissions trading scheme and tough new measures against asylum seekers from Indonesia, the statement completes the priorities set by Rudd after he deposed former Prime Minister Julia Gillard.

The statement will also increase pressure on Opposition Leader Tony Abbott to reveal his economic policy, which he has refused to do.

Abbott, caught on the back foot by Rudd's return and now facing a 50-50 race in the polls, has announced he will continue Labor's policy of sending all asylum seekers to Papua New Guinea without hope of resettlement in Australia.

He has expanded this to include setting up a new tent city to house 2000 on Nauru.

Abbott will also continue Labor's education reforms for at least four years, with some changes.

Finance Minister Penny Wong said Shadow Treasurer Joe Hockey had already announced A$70 billion ($79 billion) in planned cuts, and Abbott's support for the school reforms would add to that.

"I think it is absolutely in the national interest for the alternative government to put ... their plans for cuts forward to the Australian people," Wong said.

The new economic statement outlines savings of A$17.4 billion through tax increases and spending cuts, including a further tightening of the public service, A$1.8 billion from changes to fringe benefits tax arrangements for company cars, and an increase in tobacco excise expected to raise A$5.3 billion over four years.

Banks will pay a 0.05 per cent levy on deposits of up to A$250,000 as insurance against any future collapses, raising A$733 million within 18 months of the scheme's introduction in January 2016.

Health, education and family assistance escape any new measures.

Treasurer Chris Bowen said the measures had been forced by the global economic slowdown and the end of the Chinese investment boom that was expected to prune Australia's terms of trade by 10 per cent over the next two years.

The Government was facing a revenue shortfall of A$33 billion over the forward estimates, growth was slowing to 2.5 per cent a year, and unemployment was expected to top 6 per cent by next July.