Hockey Proposes $40 Billion in Savings to Bring Australia Back to Surplus

Australia’s opposition Liberal- National coalition proposes A$46.7 billion ($40 billion) in savings over four years to bring the budget back to surplus “as quickly as possible,” its treasury spokesman Joe Hockey said.

“We reject the notion of taxation as a penalty for success,” Hockey told the National Press Club in Canberra today. “Individuals should be able to take risks and receive due reward for their effort.”

The Labor government’s annual budget on May 11 projected a return to surplus three years ahead of forecast in 2012-13, as a result of a recovering economy, a revenue boost from a 40 percent tax on resource company profits and a 2 percent cap on spending growth.

Saving about A$11 billion from scrapping programs linked to the resource tax and “at least” A$18 billion from cancelling the planned national high-speed fiber Internet network are key to Hockey’s budget cuts, if the coalition is elected in an election that must be held by April. The opposition also plans to sell state-owned health insurer Medibank Private Ltd., according to e-mailed documents that detail its plans.

A coalition government would cancel Prime Minister Kevin Rudd’s resource tax, encourage workers to “invest in themselves” with incentives for training and boost workforce participation with a paid-parental leave scheme, said Hockey.

Another A$653 million would be saved by canceling the renewable energy future fund announced by the government last week as part of Labor’s plan to have 20 percent of the country’s energy needs met from sources such as solar, wind and geothermal heat by 2020.

Working Together

The coalition, tied with Rudd’s Labor party in the polls, says a A$42 billion stimulus handed out by the government in 2009 pushed the central bank to a world-beating round of interest rate rises, adding about A$300 a month to the cost of an average A$300,000 mortgage. The government says it staved off recession.

“By pulling together -- business, workers and government - - we avoided recession when most others didn’t,” Treasurer Wayne Swan told the New South Wales Business Chamber today, according to e-mailed speech notes. “Now our economy is forecast to rebound strongly with real GDP growth of 3.25 per cent in 2010-11 and 4 per cent in 2011-12 -- it’s a remarkable story.”

Swan expects to raise A$12 billion in the first two years of the resource tax scheduled to take effect from 2012, a move that has been criticized by miners such as BHP Billiton Ltd., the largest mining company, and Rio Tinto Group.

Replacing the “old inefficient royalties regime”, charged by state governments, will improve the viability of mining investments, particularly more marginal and risky start-up projects,” Swan said today.

To contact the reporter on this story: Marion Rae in Canberra at mrae3@bloomberg.net

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