The Australian Council of Social Service welcomes today’s announcement by the Acting Prime Minister and Treasurer Wayne Swan that the Federal Government will no longer be pursuing a budget surplus in 2012-13. 

“ACOSS supports the goal of getting the Government’s budget back into surplus when the economy is growing strongly, but that is no longer the case. Sticking to a fixed surplus target regardless of the state of the economy would not be economically sensible.

“Economic conditions are now more uncertain. There is still a large pipeline of mining related investment but the pace of that investment has slowed and business confidence has ebbed, especially in those industries and regions affected by the high dollar. The best chance for sustained growth lies in either a housing recovery or a lower dollar. But we don’t know whether the economy will succeed in changing horses in mid-stream.

“Sticking to a fixed budget surplus target is not the right strategy under these conditions.

“Regardless of the fate of the surplus target, the Government faces two budget challenges.

“First, it must make room in the budget for new expenditure in areas of high unmet need such as the National Disability Insurance Scheme, increasing Newstart Allowance, and reform of school funding.

“Second, all Governments must begin to prepare for increase in health aged care and other costs associated with an ageing population.

“The solution to both of those challenges is to clear wasteful and poorly targeted expenditure from the budget, and to avoid introducing new programs that are not rigorously designed to meet the country’s essential economic and social needs.

“There is no quick fix to the nations’ current and future budgetary challenges. While further tax reform is essential to build a reliable, efficient and equitable revenue base for the future, increasing the GST is no a magic bullet and this would erode living standards for people on low incomes.

“Government should instead start with the well-crafted recommendations of the Henry Report, especially those that remove loopholes and distortions from the income tax system. We need to get taboo issues like negative gearing and the treatment of private trusts back onto the tax reform agenda, and for the States to make better use of their most efficient taxes such as Land Tax and Payroll Tax,” Dr Goldie said.

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