A WAFER-THIN $1.5 billion surplus for 2012-13 will be the centrepiece of a budget that Treasurer Wayne Swan will say provides a buffer against uncertain global conditions and allows for interest rate cuts.
The surplus would be $2 billion in 2013-14 and would continue to grow over time, Mr Swan told cabinet in a briefing last night. He said this was also "a fair go budget" that would deliver some "really good Labor reforms" including funding for the proposed disability insurance scheme and the "schoolkids bonus".
But in caucus, the budget decision to move single mothers off the parenting payment and onto the lower dole when their youngest child turns eight has already come under fire, with left-wingers Doug Cameron and Stephen Jones criticising it.
Prime Minister Julia Gillard responded brusquely, telling Senator Cameron she had "answered that". Earlier, she said she would not answer questions that had been flagged in the media, a reference to a report quoting Senator Cameron saying he would raise the single parent issue in caucus.
Financial markets took an ominous turn on the eve of today's budget, with share prices battered as investors reacted with alarm to the results of elections in France and Greece, where voters overwhelmingly rejected politicians aligned with harsh economic austerity programs.
Australia's sharemarket fell more than 2 per cent, cutting billions from the value of local stocks.
A good reception for the budget is vital for Ms Gillard to try to get some traction. But with Speaker Peter Slipper standing aside while criminal and civil allegations against him are dealt with and the highly damaging report into Craig Thomson now on the crossbenches finally out yesterday, Labor is apprehensive about the budget being partly drowned out by these political controversies.
The government has reached its surplus through a combination of large-scale savings and shuffling spending between years.
Opposition Leader Tony Abbott said it would be based on "fiddled figures".
Mr Swan said: "It's overwhelmingly the case that the surplus is the right thing to do, with our economy expected to grow around trend and with low unemployment." The International Monetary Fund had endorsed that position.
The surplus had been hard to achieve, Mr Swan said, with write-downs of revenue of more than $15 billion since the mid-year budgetry review and about $150 billion since the global financial crisis. But the "substantial savings" were "responsible, targeted and have been made primarily with a view to protecting working families, the most vulnerable in the community, and frontline services".
Addressing her caucus, in which MPs are deeply worried about Labor's low vote and many are questioning her leadership, Ms Gillard said the government would conquer the political pressure it was under.
Frequently Asked Questions about this Article…
What is the 2012–13 budget surplus and why does it matter to everyday investors?
The budget projects a wafer-thin $1.5 billion surplus for 2012–13. For investors, a surplus can signal fiscal strength and give the government room to respond to economic shocks — the Treasurer framed it as a buffer against uncertain global conditions and as something that could support policy moves such as interest rate cuts.
How does the budget surplus change after 2012–13?
The government expects the surplus to rise to about $2 billion in 2013–14 and to continue growing over time, according to Treasurer Wayne Swan.
Could this budget lead to interest rate cuts and what would that mean for investors?
Treasurer Swan said the budget provides a buffer that 'allows for interest rate cuts.' If rates were to fall, that can lower borrowing costs for households and businesses and affect asset prices — a development investors often watch closely for effects on shares, property and fixed-income returns.
Which new spending measures were included in the budget that investors should note?
The budget includes funding for the proposed disability insurance scheme and a 'schoolkids bonus'. The government also said its savings were targeted to protect working families, the most vulnerable and frontline services.
What welfare changes in the budget caused controversy and could they impact market sentiment?
The budget proposes moving single mothers off the parenting payment and onto the lower unemployment payment once their youngest child turns eight. This measure drew criticism from some Labor MPs and may contribute to political risk that investors watch when assessing market sentiment.
How did financial markets react around the time the budget was announced?
Financial markets were jittery on the eve of the budget after election results in France and Greece; Australia's sharemarket fell more than 2%, wiping billions off local stock values, as investors reacted to global political developments.
How did the government achieve the forecast surplus and what criticisms were raised?
The government said the surplus was reached through a combination of large-scale savings and by shuffling spending between years. Opposition Leader Tony Abbott called the figures 'fiddled', while Treasurer Swan defended the surplus as appropriate and noted endorsement from the International Monetary Fund.
Are there political risks tied to the budget that everyday investors should be aware of?
Yes. The budget's reception could be affected by a number of political controversies mentioned in the article — including Speaker Peter Slipper standing aside amid allegations and a damaging report into Craig Thomson — and Labor expressed concern the budget might be drowned out by these issues, which could influence investor confidence.
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