Budget may be in surplus four years early From: AAP March 15, 2010 6:23PM Increase Text Size Decrease Text Size Print Email Share Add to Digg Add to del.icio.us Add to Facebook Add to Kwoff Add to Myspace Add to Newsvine What are these? SEPCULATION that Treasurer Wayne Swan will hand down the Henry Tax Review on the same day as the May 11 Budget would seem unlikely if research by a leading Australian investment bank proves correct.
Macquarie Research says the Budget could be brought back to surplus by 2011-12, four years earlier than forecast by the Government, and without "punishing taxes or savage costs to spending".
Last November's Mid-Year Economic and Fiscal Outlook (MYEFO) forecast a $31.2 billion deficit in 2011/12.
Given this marked turnaround in the fiscal position, the report suggests that the Government wouldn't want to distract from the presentation of the Budget in this election year with the Henry review.
Mr Swan yesterday said the tax review conducted by Treasury Secretary Ken Henry would be made public by the time the budget is delivered on May 11.
But he would not rule out it being released on the same day.
Macquarie Research senior economist Brian Redican said the economy was a lot stronger than expected than in MYEFO with "unemployment the standout factor".
Data last week showed the jobless rate at 5.3 per cent in February, having peaked at 5.8 per cent last year.
In MYEFO, the unemployment rate was forecast to reach 6.75 per cent by mid-2010 and not fall below 5.5 per cent until 2014-15.
This means that not only is the Government having to pay less unemployment benefit, more workers are paying income taxes than previously expected.
At the same time, the recovery should see corporate tax receipts turn around more quickly than anticipated, commodity prices are stronger and capital gains tax receipts will be greater because of higher house prices and strong equity markets.
"So you put that together with the two per cent spending constraint and you can flick back (to surplus) pretty rapidly," Mr Redican said.
In MYEFO, the Government projected the budget would return to surplus in 2015/16, using what Mr Redican considers as conservative forecasting methodology.
"So whether they actually have the confidence to make that brave call (for an early return to surplus) is another thing," Mr Redican added.
The Opposition was again demanding an immediate release of the Henry Tax Review saying its delay was serving no purpose than preventing public scrutiny to consider the report's recommendations.
Opposition assistant treasury spokeswoman Sussan Ley said the review was widely expected to have been released in March after it was handed over to the Government by Dr Henry just before Christmas.
"Business, in particular, needs certainty to make investments. Without the Henry Review on the table all they can do is delay and that puts jobs on hold," Ms Ley said in a statement.
Tax professionals are also concerned that the treasurer failed to rule out releasing the review on Budget day, saying it would not give the report the recognition it deserved.
"The Henry report stands to be the most important milestone in recent tax reform history and how the Government deals with its recommendations will have an impact on the lives of every Australian," president of the Taxation Institute of Australia David Williams said in a statement.
Macquarie's Mr Redican said one reason that the Government might want to bring down the review and budget papers on the same day would be if it wanted to "tweak" some taxes in the 2010/11 Budget year.
"You wouldn't announce that before the budget is brought down,'' he said.
