Australia Promises Shared Burden Amid Doubts on Debt Levy

Photographer: Jason Alden/Bloomberg

Tony Abbott, Australia's prime minister, hasn’t confirmed or denied whether the government would impose a debt levy that the Adelaide Advertiser reported April 29 would be levied at 1 percent on income of more than A$80,000 a year, without saying where it got the information. Close

Tony Abbott, Australia's prime minister, hasn’t confirmed or denied whether the... Read More

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Photographer: Jason Alden/Bloomberg

Tony Abbott, Australia's prime minister, hasn’t confirmed or denied whether the government would impose a debt levy that the Adelaide Advertiser reported April 29 would be levied at 1 percent on income of more than A$80,000 a year, without saying where it got the information.

Australians need to share the burden of reducing the country’s debt in a budget due May 13, Prime Minister Tony Abbott said, after an opinion poll found most voters think he’s broken a promise on tax.

“A strong budget is the foundation for a strong country” and Australians need to “chip away” at public debt, Abbott said in an e-mailed statement yesterday. A temporary levy increasing the top rate of income tax would be a broken promise, said 72 percent of people in a Galaxy poll for the Sunday Telegraph newspaper yesterday.

Australia, with the second-lowest public debt levels among developed countries, is looking at raising its pension age, charging for doctor visits, and abolishing government bodies to cut A$123 billion ($114 billion) of deficits forecast for the four years through June 2017. Fiscal austerity comes at the same time that mining companies are cutting back on projects, threatening to damp a recovery in domestic demand and pressuring the central bank to maintain low borrowing costs.

Abbott hasn’t confirmed or denied whether the government would impose a debt levy that the Adelaide Advertiser reported April 29 would be levied at 1 percent on income of more than A$80,000 a year, without saying where it got the information.

“I am not going to deny for a second that there will be people who will be disappointed,” Abbott told Channel 9 television today. “No one likes difficult decisions.”

‘Alienating Constituency’

Abbott’s statements on tax risk “alienating his own constituency and fundamentally confusing the Australian public” Haydon Manning, an associate professor of politics at Flinders University, said by phone from Adelaide yesterday. “If they go ahead with the levy on A$80,000 a year I would imagine that would stick in the craw of many voters who swung strongly to the Coalition.”

A debt levy would be seen as a broken promise by 72 percent of voters and 52 percent of supporters of Abbott’s Liberal-led Coalition, according to the Galaxy poll of 1,391 voters taken from April 30 to May 1.

The Coalition would lose the two-party preferred vote in an election to Labor by 48 percent to 52 percent, according to the poll.

Proposals put out ahead of the budget have been “a massive set of broken promises and all the wrong priorities”, opposition leader Bill Shorten told reporters in Melbourne yesterday. “Australians do not want to pay increased taxes for Tony Abbott.”

In a survey of 364 businesses by the Australian Industry Group, 70 percent counted cutting company tax as one of their top three priorities and 57 percent included balancing the budget in five years. Just 28 percent thought balancing it in two years was a priority.

‘Clear Preference’

“While business is clearly backing the need to consolidate the budgetary position,” AIG Chief Executive Officer Innes Willox said in a statement, “the clear preference is for this to be done in a measured way over a number of years rather than risking damage to the still-fragile economy by cutting too fast or too hard.”

A government Commission of Audit tasked with finding areas to cut government spending last week recommended selling off rail and postal assets, cutting family welfare payments, and changing age pensions and unemployment benefits.

Eligibility for the state pension will rise to 70 by 2035, Treasurer Joe Hockey said May 2, compared with 65 at present and a promised level of 67 by 2023.

The government will pledge a “growth agenda” in the budget, with heavy spending on infrastructure if it can secure the sale of assets such as Snowy Hydro Ltd. in southeast Australia, the Australian newspaper reported today, without saying where it obtained the information.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editors responsible for this story: Stanley James at sjames8@bloomberg.net Jim McDonald, Edward Johnson

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