Labor's updated economic statement: Key points Updated 5 minutes ago
RELATED STORY: Live: Government releases economic statementRELATED STORY: Deficits, cuts in election-eve budget updateRELATED STORY: The factors behind the hole in Labor's budget MAP: Australia The Government's updated economic statement shows slower economic growth, higher unemployment and a $30 billion deficit this year.
It is a tough time to be Treasurer Chris Bowen: he is grappling with revenue shortfalls, while there has also been more Government spending and a few cost blow-outs.
As it tries to plug the budget hole, the Government has made spending cuts and tax hikes worth $17.4 billion.
Here are some of the key points in the mini-budget-style document, viewed as the last major item on Prime Minister Kevin Rudd's pre-election agenda.
The state of the budget Asylum seeker policy Levy on bank deposits Tax hike on cigarettes Other measures The state of the budget
The statement, released by Mr Bowen and Finance Minister Penny Wong, shows revenue is $33.3 billion lower over four years since the May budget.
The predicted deficit for 2013-14 has gone from $18 billion to $30 billion. In 2014-15 it has gone from $11 billion to $24 billion.
In 2015-16, when the budget was supposed to be in balance - a small surplus of $800 million - it will have a deficit of $4.7 billion.
VIDEO: Bowen, Wong release economic statement (ABC News) The Government says its target for a surplus in 2016-17 will be met, but has been significantly trimmed from $6.6 billion to $4 billion.
The Government says the figures reveal a "medium-term consolidation and path back to surplus" which it says is appropriate given "Australia's strong economic fundamentals".
"We have taken responsible savings and revenue decisions," Mr Bowen said.
"You can be cute about these things, but is it being fair dinkum with the Australian people? We're calling it as we see it. We're saying there are challenges here."
Cuts and tax hikes worth $17.4 billion have been made as the Government tries to fill the budget hole.
Economic growth is also expected to be softer, with GDP growth at 2.5 per cent in 2013-14, down from 2.75 per cent in the May budget.
That will push up unemployment to 6.25 per cent for this year and next year - representing a further 70,000 people out of work.
"They are still impressive figures in the worldwide context," Mr Bowen said.
Asylum seeker policy
An asylum seeker boat sits in a bay at Christmas Island. PHOTO: The record rate of asylum seeker boat arrivals led to a huge blowout in the immigration budget. (Audience submitted: Mark Trenorden) The statement reveals the cost of managing the surging numbers of asylum seekers has also blown out by another $350 million.
That adds to the May budget's forecast of an extra $1.3 billion next financial year.
The Government's plan to process and resettle asylum seekers in Papua New Guinea is proving to be a costly one, at $1.1 billion over the next four years.
The package includes a significant expansion of the Manus Island detention centre to house 3,000 people, up from the original capacity of 600.
The cost of expanding the detention centre will be $113 million in 2013-14.
But the Government says it the $1.1 billion cost will be partially funded from a $423 million reduction in the operating costs of its onshore detention network.
The costs have also been partly offset by $236 million in cuts to AusAID programs.
There will also be $420 million spent directly on aid projects in PNG, around half of that on health.
Levy on bank deposits
A 0.05 per cent levy on bank deposits up to $250,000 will be collected from January 1, 2016, and is forecast to raise $733 million in its first 18 months.
The Government says the money raised will go into a new Financial Stability Fund, acting as insurance in the event of a banking collapse or financial crisis.
The move would extend an implicit Government guarantee on deposits that has existed since the global financial crisis threatened some of Australia's smaller banks.
The levy will help prop up the budget bottom line, but the Government says it will not be used as general revenue.
VIDEO: Government to pursue levy on bank deposits (Lateline) "It'll be quarantined from the rest of the budget and just put aside in case there's ever a need with a bank getting into trouble in Australia," Mr Bowen told Channel Seven.
The Opposition has criticised the measure, saying it has nothing to do with good policy.
Bank of America Merrill Lynch economist Saul Eslake has described the policy as an "accounting trick" by the Government.
Economist and former Reserve Bank board member Warwick McKibbin has told Radio National the money should not be used to cover a budget shortfall.
"If it's purely a revenue grab and it’s just going to be consolidated revenue to make a fiscal position look better, that’s not a very good signal to send," he said.
"It's much better if it's done, like we do with the Future Fund, funding the liabilities of retired public servants. This should be an independent fund that's managed for the sole purpose of providing insurance if it's required."
The idea of a levy to safeguard banks was among recommendations made by the International Monetary Fund in a 2012 review of Australia's financial sector.
The US, Germany, Canada, France, Hong Kong, Singapore and Japan have deposit insurance schemes.
The banks have warned that the cost of the levy will be passed on to customers in the form of lower interest payments on deposits.
Tax hike on cigarettes
From December 1, the tax on cigarettes will rise by 12.5 per cent each year for four years, raising $5.3 billion over the forward estimates.
Some of the money will go towards cancer-related health services, but it will also be used to help pay for some of the Government's new spending commitments.
VIDEO: Bowen confirms increase in tobacco excise (ABC News) Smoking kills at least 15,000 Australians every year, and more than 750,000 hospital bed days per year are attributable to tobacco-related disease.
The Government is selling the health benefits of the measure, saying it will help reduce the number of smokers while also providing revenue for the embattled budget.
"[The] last time tobacco tax was increased it appears to have reduced consumption of tobacco by about 11 per cent," Mr Bowen said.
But the Opposition says it will just increase the cost of living for people on lower incomes.
"It is going to increase the cost of living for smokers but smokers could be pensioners, low-income people, it could be smokes and beers might be the thing that is important to them," Mr Hockey said.
Prices vary, but currently a packet of 20 cigarettes costs about $18.
The tax rises will increase the price of a packet by more than $5 by 2016.
Other measures
Australia's aid budget will be cut by $879 million over the forward estimates, though the Government says spending will still increase overall by 26 per cent.
Changes to fringe benefits tax arrangements for cars are forecast to raise $1.8 billion.
Another $1.3 billion will be added to the budget bottom line through chasing unpaid tax and superannuation and raising the threshold from $2,000 to $6,000 on lost super accounts to be transferred to the ATO.
The statement also reveals $500 million in savings described as decisions "taken but not yet announced", while Mr Bowen says there has also been "reprofiling" of some Defence spending.
In one move that could be seen as an election sweetener, the Treasurer has deferred the move to cap tax breaks on self-education expenses by a year.
It was to have been limited to $2,000 per year from next July, but the change will apply from 2015 to allow for consultation on the impact of the change.
The Australian Healthcare and Hospitals Association, one of several professional bodies to criticise the cap, says it is a wise decision.
But its chief executive Alison Verhoeven is calling on the Government to scrap the cap completely.
"The imposition of a cap on education expense claims to avoid rorting was a heavy-handed approach that would penalise professionals across the country," she said.
