WORKERS who get a tax advantage sacrificing their salaries for tickets to events such as V8 Supercar races are among those who will bear the brunt of billions of dollars of budget cutbacks to be unveiled this morning in a bid to wipe government debt by 2021 and pressure the Reserve Bank to cut interest rates again next week.
The mid-year budget update is being brought forward from November in order to get eight full months of revenue this financial year from the measures that will apply from November 1 and to present the Reserve Bank board with a picture of fiscal discipline when it meets to consider a second successive rate cut on Melbourne Cup Day, November 2.
The cost of family reunion visas will soar next month as a result of a rule change that will require a visa for each member of a family being reunited rather than a single visa per family. The cost of each visa will jump by roughly 30 per cent in order to lift Australia's charges to the average of other countries.
The government will also close a loophole that allows a very small group of workers to use salary sacrificing to get taxpayer-funded discounts for things such as theatre tickets and V8 Supercar tickets. Until now there has been no tax on the first $1333 of so-called "in-house fringe benefits" such as cricket bats for sports store employees, even when the worker buys them by sacrificing salary.
The change will hit South Australian public servants who are able to salary sacrifice to buy tickets to V8 races and University of Western Australia academics who can salary sacrifice to buy tickets to the Perth International Arts Festival. It will not hurt workers who receive goods for free but it will hit workers who use staff discount cards.
Treasurer Wayne Swan says the cutbacks will "reflect Labor values in doing the utmost to protect low and middle-income earners and the community's most vulnerable".
Budget revenues are down $4 billion on what was expected this financial year and $21 billion over the next four years, enough to obliterate this year's forecast surplus of $1.5 billion and the forecast surpluses for each of the two following years. The cutbacks to be announced this morning will restore the forecast surpluses and put the government back on track to be debt-free by 2021.
It will be the fourth consecutive mid-year update to cut spending and will bring to around $150 billion the ongoing savings made by Labor over five years. Treasury analysis cited in the update will show those savings have improved the budget position by 0.9 per cent of GDP this financial year and will have improved it 2 per cent by 2022. They will be used to argue the savings are long term rather than quick fixes intended to secure a temporary surplus.
The Department of Defence will be the biggest victim in the bureaucracy of budget cuts, other departments having already had cuts of 4 per cent.
A rare spending measure today will gift $10 million to a new superannuation consumer centre to lobby on behalf of superannuation customers.