The federal government has targeted company tax, the baby bonus and private health insurance as part of a new round of spending cuts which will deliver it a forecast surplus of $1.1 billion this financial year, $400 million less than forecast at the May budget.
The government needed to repace $4 billion in lost tax revenue this financial year, and $21 billion over four years through savings and increases in charges.
Treasurer Wayne Swan is set to announce a $1 billion forecast surplus for this financial year. Photo: Alex Ellinghausen
The savings include cutting the baby bonus from $5000 to $3000 for the second and each subsequent child, and reducing the level of rebate the government will provide for private health insurance.
And to maintain surpluses over future years, corporations will have to pay company tax monthly, rather than quarterly.
‘‘This will ensure that instalments are closely aligned to fluctuations in these businesses’ income,’’ says the mid-year budget papers, released this morning.
The company tax changes will bring in $8.3 billion in the next three years, starting in 2013-14, including $5.5 billion next financial year.
Treasurer Wayne Swan said it was "absolutely appropriate" that the government stuck with its surplus goal.
He said Australia had a combination of strengths that put the economy "up in lights" compared to other developed economies.
Mr Swan said that many of the savings improved the underlying position of the budget over time, and that a number of the measures would require legislation.
This morning, Mr Swan announced the updated surplus of "around $1 billion" on Twitter. While the move raised some eyebrows, the Treasurer was unfussed.
"Welcome to the 21st century. It's good to get it out to everyone at once," he said. "Our regard for it [the surplus] doesn't change because it was out on Twitter."
On the cuts to the baby bonus, he said that many families received strong Commonwealth support through the tax system, citing Family Tax Benefits and paid parental leave.
"We believe these changes to the baby bonus will bring it more into line with the actual costs of having children," he said.
Declining commodity prices have led to a crash in forecast receipts from the mining tax from a $13.4 billion over four years to $9.1 billion.
The fall in commodity prices has also resulted in a crash in company tax collections.
Combined with the mining tax crash, a $1.1 billion blowout in the cost of asylum seekers for this year, and other changes, the budget has lost $3.9 billion in tax receipts for this financial year since the May budget and $21 billion over four years.
The changes to private health insurance will save $700 million over three years and will start in April 2014. In the May budget, the government means-tested the private health insurance rebate to save about $2.8 billion over four years.
Under the new cuts, which will increase the cost of all premiums, the government’s 30 per cent rebate will no longer automatically be increased to match the annual increase in premiums.
Instead, the rebate will be indexed to inflation, which is less than the premium increases. But if the premium increase is less than inflation, the rebate will be indexed to that.
The cuts to the baby bonus will begin on July 1, 2013, and will save $461 million over three years.About $500 million in education grants have been frozen.
The Families Minister, Jenny Macklin, said the baby bonus change, for babies born on or after July 1 next year, recognises the fact families buy the big-ticket nursery items when their first child is born.
‘‘Most families don’t face the same upfront costs for a second or third child as they do for the first.
Expensive items such as the cot, pram, change table and baby capsule are generally reused for younger siblings,’’ Ms Macklin said.
'‘It’s important that the family payment system is sustainable into the future.’’
However, Eva Cox, the convenor of the Women's Equity think tank said she was worried the reduction in the baby bonus would disadvantage unemployed women and casual workers who were not eligible for paid parental leave.
"They claim that they're protecting the vulnerable, but I'm not sure they have in this case," Ms Cox said.
Australian Christian Lobby managing director Jim Wallace said the change would act as a disincentive to have children.
"People aren't going to be encouraged to have more than one or two children unless those financial encouragements are there through things like the baby bonus," he said.
The papers forecast that after a $47 billion deficit last financial year, there would be a $1.1 billion surplus for this year, a $2.2 billion surplus for next year, a $3.3 billion surplus in 2014-15 and a $6.4 billion surplus for 2015-16.
The statement forecasts unemployment to average 5.5 per cent for this year and next year, and for growth to stay at a trend rate of 3 per cent, which is 0.25 percentage points lower than forecast in May.
Greens Leader Christine Milne would not rule in or rule out the party's support for the measures in the budget that required legislation.
Senator Milne said the Greens wanted to now have a look at all the new measures, adding they had an "open mind" about what they would and would not support in the parliament.
Private Healthcare Australia chief executive Michael Armitage said the change to the indexation of the private health insurance rebate would lead to people paying more for cover."Health inflation runs at a figure significantly higher than the consumer price index (CPI) and therefore it is likely that consumers will be paying more for their private health care,'' Dr Armitage said.
Dr Armitage said the change would be ''a further imposition on privately insured Australians", which would also hurt the public system.
"Any move which might result in people leaving private health insurance will also have a negative effect on public hospitals," he said.
A spokeswoman for the nation's largest health insurer, Medibank Private, said ''a range of other reforms will be required to ensure that this does not lead to an adverse impact on the overall cost of health insurance for all Australians".
With Dan Harrison