LOW and middle income earners will be eligible for $20 billion in cost-of-living assistance over the next four years after today’s federal budget unveiled another $5 billion in payments to coincide with the introduction of the carbon tax.
The budget, which the Treasurer, Wayne Swan described as Labor to its bootstraps, abolishes planned cuts to company tax and instead gives the money to families and welfare recipients.
Big business will be angry but Mr Swan said the company tax cuts, opposed by both the Greens and the Coalition, were never going to pass Parliament.
The company tax cuts were to be funded by the mining tax, a policy for which Labor received next to no support from the big end of town.
In a shot at business, Mr Swan said if it wanted a company tax cut, it should help by identifying how to pay for them and help ensure necessary political support.
The change puts the Opposition under pressure because it has vowed to abolish the mining tax and everything is will fund. Instead of the company tax cuts, the money will be used for a $1.1 billion Supplementary Allowance to be paid to people on the dole, youth allowance or the parenting payment.
It is worth $210 a year for singles, and $350 for couples, who are either on the dole, youth allowance or the parenting payment.
In addition, Family Tax Benefit A payments will be boosted by $1.8 billion, which is worth as much as an extra $300 a year for families with one child and $600 for families with two or more children.
The Coalition must now decide whether to oppose these payments when the legislation comes before the Parliament. Late today, it blocked the government from introducing legislation for the other cost-of-living measure – the $2.1 billion ”schoolkids bonus” in which low and middle-income earners will receive $410 a year for each child at primary school and $820 for each high school student.
The budget reported a $44 billion deficit for this financial year, turning into a $1.5 billion surplus for 2012-13, and growing each year afterwards.
It predicts the surplus to return to 10 per cent of GDP – about 14 billion – by 2017-18, and for net debt to be eradicated by 2020-21.
The government has been criticised for returning to surplus by the the $17 billion in net savings are not broadly unpopular. Defence took a $45.4 billion hit, increases to foreign aid were deferred by a year, saving $2.9 billion.
The government scrapped plans to allow a 50 per cent tax deduction on interest on savings, which saved $900 million, and also scrapped plans for a standard annual tax deduction, saving another $2.1 billion.
It also deferred for another two years plans to allow people to contribute up to $50,000 to their superannuation at the concessional 15 per cent rate. The cap will stay at $25,0000, saving $1.5 billion.
The budget said the return to surplus would give the Reserve Bank further scope to reduce interest rates.
The heavy emphasis on the cost of living comes as the government is trying to reconnect with voters – many of which are Labor voters – who are angered by the cost of living and the associated carbon tax.
The extra $5 billion in measures announced today add to the $15 billion in tax cuts and increased benefits already planned as carbon tax compensation over the next four years.
”We understand the pressures Australians face, paying for electricity, housing, groceries, petrol or even a simple family outing,” Mr Swan said.
”They don’t feel this boom is their boom,” he said.
Despite a bleak global economic outlook, the budget forecasts the economy to grow at a healthy 3.25 per cent per cent next year and stay at trend or above afterwards.
And despite repeated claims by the Opposition that miners are telling them ion private they will pay no mining tax, the budget forecasts this tax to earn $13.4 billion over four years