Australian Prime Minister Julia Gillard’s government is facing a revenue shortfall of about A$5.9 billion ($6 billion), undermining her ruling Labor party’s economic credentials with elections due in September.
“Company tax and resource rent taxes continue to be hit by a combination of the high dollar, lower commodity prices and greater deductions from the investment boom,” Treasurer Wayne Swan said today at a speech in Sydney. Cash receipts for the six months to Dec. 31 were A$3.9 billion less than previously forecast and “early data for January suggests another A$2 billion could be added to that revenue shortfall,” Swan said.
Gillard’s bid to overcome the opposition Liberal National coalition’s lead in opinion polls is being damaged by weaker growth, lower prices for Australia’s resources, and a strong local currency that’s curbing tax receipts. She was forced in December to abandon a pledge to return the budget to a surplus this year.
Gillard’s Minerals Resource Rent Tax, which puts a 30 percent levy on iron ore and coal profits, raised A$126 million in its first six months, trailing targets, the government said earlier this month. The Tony Abbott-led opposition claims the shortfall in revenue is an example of the government’s fiscal bungling.
“The MRRT -- as a profits-based tax -– has been impacted substantially by the slump in commodity prices, but the MRRT is still only responsible for around 20 percent of the write down in revenue,” Swan said today. “Expected revenue in 2012-13 has been revised down by over A$25 billion since the 2010 election.”
In its October mid-year review, the government forecast a budget surplus of A$1.08 billion in the 12 months ending June 30. It recorded a A$44 billion deficit last fiscal year. It cut the estimated revenue from the mining tax to A$2 billion from a A$3 billion forecast in May.
Weaker commodity prices and an elevated currency have prompted mining companies including BHP Billiton Ltd. to put off projects and cut jobs, while a construction slump forced building-materials company Boral Ltd. to reduce payrolls.
Iron ore prices into China averaged about $117 a metric ton in the six months to Dec. 30, compared with about $159 a year earlier. Queensland coking coal averaged about $173 a ton in the half, compared with about $250 a year earlier.
Gillard has seen support for her party slump in recent weeks. Labor fell 5 percentage points to 44 percent on a two-party preferred basis, with Abbott’s Liberal-National coalition surging 5 points to 56 percent, according to a Newspoll survey published in the Australian newspaper Feb. 4. The measure is designed to gauge which major party is likely to win the seats required to form a government.