FEDERAL BUDGET 2012: No smoke, no mirrors

At its core, what Wayne Swan has handed down is a big taxing, big spending budget – just what you’d expect from an unpopular government approaching an election.

And everyone thought this was going to be a tough budget. It was a piece of cake really – Wayne Swan hardly had to employ any smoke and mirrors at all. Just do a bit of pea-and-thimble shuffling of spending out of 2012-13, and revenue in, both forwards and backwards, forecast a bumper 11 per cent increase in tax revenue, and – hey presto! – watch me pull a surplus out of my hat.

That’s right, tax receipts are going to grow by 11 per cent in 2012-13, according to this budget, including company tax up 9 per cent and personal tax up by 8 per cent. On top of that, there’s an extra $5.6 billion from resource rent taxes and $4 billion from the carbon tax.

This is, at its core, a big taxing, big spending budget, including a big increase in welfare. It is the budget of an unpopular government approaching an election, not one that’s tightening the belt.

According to Budget Paper No.2 – Budget Measures, "expense measures” in this budget actually increase spending by $201.2 million.

There are a total of 284 separate increases in spending in the budget, ranging in size from $100,000 (a new Remote Jobs and Communities Programme) to $911 million (continuing "Operation Slipper” in Afghanistan).

On top of that, about $1.6 billion in spending was pulled forward from 2012-13 into 2011-12: $1.1 billion has been thrown at local councils this year in grants that were due to be paid in 2012-13, and another $500 million has been pulled forward by replacing the Education Tax Refund with a "Schoolkids bonus”.

In total, welfare payments, including the school kids bonus and the extra family welfare, go up by $4.8 billion.

Meanwhile the revenue measures in this budget add up to $1.7 billion in extra revenue, but they’re mostly just deferrals of tax cuts and special dividends.

The higher cap for super contributions has been deferred ($580 million more money in 2012-13), the company tax cut has been scrapped ($302 million), another $121 million will be pulled out of super by implementing the so-called "SuperStream” reforms, and $200 million will be yanked out of the Export Finance and Insurance Corporation as a special dividend and a $100 million one-off dividend from the Australian Reinsurance Pool Corporation. Oh, and there’s $127 million from the cigarettes and tobacco excise.

Tax receipts usually grow by about 8 per cent a year, thanks to fiscal drag (taxpayers moving into higher marginal brackets), but this year’s increase is a blockbuster 11 per cent. Yes, it’s about $6 billion less than forecast six months ago but that was just a silly forecast.

Is the new one silly as well? Probably, but we won’t really know for 18 months.

Iron ore and coal companies aren’t expecting to pay any MRRT, so the $3.5 billion budgeted from that in 2012-13 looks dodgy, and the rest of the increase depends on economic growth of 3.25 per cent and on the companies that are due to pay the carbon tax continuing to spew out greenhouse gases at the same rate, rather than doing something about it to avoid tax.

The important thing is that, thanks to the budgeted $33.4 billion increase in tax revenue, the government doesn’t have to cut spending and can actually increase it. I know they will tell you that spending is, indeed, being cut, but don’t believe it.

One of the curious things in this budget is that it assumes a cut in staff numbers for the Commonwealth public service of 3,073 to 258,563, or 1.2 per cent – not much, but better than the big increases of previous years. A third of the cut is in the Australian Taxation Office, which is supposed to be losing 1,039 staff, and half the rest is just casual census collectors moving off the books.

Yet the budget also says $378 million is going to be provided to the ATO over four years so it can increase its collection of tax debts, increase its GST collections, and fight tax evasion.

That investment is budgeted to provide a return of $2.4 billion over the forward estimates – six times the investment – but you would think it won’t result in a staff cut of more than 1,000 people in the ATO, if they are supposed to run down that much more tax.

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