The 1996/97 federal budget anticipates cutting the underlying budget deficit to A$5.6bn in the current fiscal year, from A$10.3bn during 1995/96. It also sets the scene for an underlying deficit of A$1.6bn in 1997/98 and a return to underlying surplus (A$957m) in 1998/99. The federal government expects the headline deficit figure (which includes the proceeds of asset sales) to be in surplus over the entire period.
--with spending cuts bearing the brunt of reform--
In the absence of policy changes, Treasury had estimated that an underlying deficit of A$9.6bn would have been recorded for 1996/97. Cuts to net spending account for around A$2.9bn of the A$4bn difference between the no- policy-change figure and the budgeted figure of A$5.6bn. Total spending cuts amount to A$4.5bn, partly offset by increased spending of A$1.5bn (mainly on the family tax package and the gun buy-back scheme).
The cuts to spending are numerous, with the largest being in allocations to the states (A$619m), labour market programmes (A$575m), a planned 2% reduction in federal government running costs (A$187m), additional higher education contribution charges (A$133m), cuts in highway funding (A$113m) and the abolition of the development import finance facility (A$94m). The largest single cut in outlays (A$2.5bn) relates mainly to lower interest payments flowing from the reduced deficit.
--but some revenue increases are expected too
The net increase in revenue detailed in the budget amounts to A$1bn, with the largest item being A$515m raised by the gun levy (a one-year impost of 0.2% on taxable income to fund the government purchase of guns declared illegal). Changes to the tariff concession system (which impose a duty of 3% on previously exempt items) will raise a further A$313m.
The 1996/97 budget A$ m % of total Receipts Taxes on individuals 65,940 48.5 Company taxes 19,700 14.5 Sales tax 13,890 10.2 Excise duties 13,360 9.8 Customs duty 3,010 2.2 Fringe benefits tax 3,180 2.3 Superannuation tax 1,800 1.3 Other taxes & fines 4,148 3.1 Snowy Mountain repayment 725 0.5 Interest & dividends 5,132 3.8 Asset sales 5,100 3.8 Total receipts 135,985 100.0 Outlays Social security 48,897 36.1 Health 19,408 14.3 State governments 16,797 12.4 Education 11,064 8.2 Defence 10,027 7.4 Labour & employment 3,235 2.4 Law & transport 2,682 2.0 Housing & recreation 2,512 1.9 Agriculture & mining 3,652 2.7 Public service 7,197 5.3 Interest payments 9,781 7.2 Other 260 0.2 Total outlays 135,511 100.0 Headline surplus 474 n/a Net advances (mainly asset sales) -6,123 n/a Underlying balance -5,649 n/a Source: Press reports.