Federal Government to extend tax breaks for business, driving Budget into massive debt to beat economic recession
The Federal Government will extend tax breaks for business as it drives the Budget into the biggest black hole in the nation’s history to beat economic recession.
Treasurer Wayne Swan has delivered his second federal Budget, warning of tumultuous economic times ahead but outlining a raft of new infrastructure projects to get the economy moving.
Labor will spend $22 billion over four years on transport networks and universities in a Budget it dubs nation-building.
But the massive investment, along with sharp declines in revenue, will see the deficit blow out to $57.6 billion this year – 4.9 percent of GDP.
Treasury predicts the economy will remain in decline for the coming financial year at -0.5 percent GDP growth, with unemployment to hit a peak of 8.5 percent by 2011.
Swan says the number of unemployed is “less than the double-digit rates of other advanced economies, but still too high for this nation, and for this Government”.
He says the Government has a plan to put the Budget back into surplus, built on returning to growth of 4.5 percent in the years ahead.
“You can balance the budget by dramatically pushing up taxes and slashing and burning vital services in key areas like health, leading to a deeper and longer recession, and higher unemployment. Or you can offset a temporary collapse in revenue with a program of responsible borrowing that also provides for the stimulus the economy needs when private sector investment is in retreat,” he told parliament.
“This is the course the Government has adopted. It is the only responsible course.”
In a major win for business and many manufacturers the Government will increase its small business tax break to 50 percent on eligible assets ordered between December 2008 and December this year, along with a program to help business take advantage of “e-business opportunities”.
It will also extend the first home owner grant for a further six months, but will halve the rebate after three months.
The Budget contained increases to the aged pension as expected, along with an announcement the Government will work towards raising the age when the pension can be claimed to 67 by 2023.
ROADS, RAIL AND PORTS
The Government will invest a total of $8.5 billion in road, rail and port projects in 2009-10, including big investments in metro passenger rail systems and the north-south freight corridor.
Labor is focussing on what it now calls Network 1 – the freight route which stretches from Melbourne to Cairns – with $3.4 billion worth of upgrades on the Pacific, Bruce and Hume highways, the Ipswich Motorway and the new Hunter Expressway.
Key projects include:
- $1.5 billion for the Hunter Expressway, a new dual carriageway road in New South Wales between the F3 and the New England Highway near Branxton
- $618 million towards a dual carriageway bypass of Kempsey and Frederickton to the east of the existing Pacific Highway
- $488 million to replace 25km of the Bruce Highway between Cooroy and Curra in Queensland with a four lane divided carriageway
- $884 million to upgrade the Ipswich Motorway from Dinmore to Goodna.
The Government had earlier pledged $70 million for trucking safety and productivity, to be spent on rest areas and technology trials. Submissions have now been received for the first round of the program, with a second round of $40 million to be allocated later this year.
Another $389 million will be invested in bulk commodity ports, including capacity improvements for the Port of Darwin and new common-user facilities at the Port of Oakajee near Geraldton.
A total of $4.6 billion will be spent in construction works and planning on metropolitan rail projects in Sydney, Melbourne, Perth, Adelaide, the Gold Coast and Brisbane.
Meanwhile, $2.6 billion will be spent on priority infrastructure projects at Australia’s universities and tertiary institutions. And the fight against climate change wins $4.5 billion for clean energy initiatives.
“Nation building for the recovery has become Australia’s central task,” Swan says. “The central task of this Government. And the central task of this Budget.”
More to come, including complete reaction from business and industry…