The global recession will wipe a staggering $115 billion off tax revenues over the next four years, sending the budget reeling into deficit, Prime Minister Kevin Rudd says.
The figure is $75 billion more than predicted in November in the Mid-Year Economic and Fiscal Outlook (MYEFO), and reflects falling business and income tax receipts, as well as a halving in China's economic growth.
"That means an impact directly on our budget, that means, therefore, of course, a temporary budget deficit," Mr Rudd told reporters on Monday.
"That figure equals about half the government's total tax receipts in a given year, although of course that figure ... is spread across the forward estimates."
Mr Rudd's announcement follows the International Monetary Fund's prediction last week that the Australian economy would contract by 0.2 per cent in 2009, and at the very best stall to a position of zero growth.
Given the rapidly changing circumstances of the global recession, Mr Rudd said the government would soon give a full updated statement to parliament reconciling the economic figures for the period ahead.
Treasurer Wayne Swan said the next economic stimulus package would be announced within days.
Asked if the initial $10.4 billion stimulus package, delivered last year, had failed to stop the economic meltdown, Mr Rudd firmly backed his actions.
"I would hate to see the impact on Australia's jobless numbers had we not acted with the economic security strategy of last October," said the prime minister, flanked by Mr Swan and Finance Minister Lindsay Tanner.
"We are going to move heaven and earth to try and support growth in the economy."
Mr Swan said the further fall in revenue was made up of a drop of $50 billion in company tax receipts, a reduction of $13 billion in income tax, a $10 billion fall in GST receipts, and another drop of $2 billion in assorted taxes.
While not giving anything away about the next stimulus package, he ruled out any tax increases.
"An income tax increase in this environment would be absolutely destructive," he said.
Mr Swan said a tax increase would be what logically followed from proposals by Opposition Leader Malcolm Turnbull who had pressed the government not to take the budget into temporary deficit.
"He would be proposing either an income tax increase or savage cuts in expenditure, one or the other," he said.
Mr Tanner said the government was already thinking about how to return the budget to surplus.
"We're committed to getting the budget back into surplus as soon as possible," he said.
Mr Rudd said the government was committed to an orthodoxy of maintaining a budget surplus over the economic cycle, which at present was one of global recession.
"Once economic growth resumes more than trend growth across the global economy, action, of course, is going to be commenced to bring the budget back in the direction of a balancing surplus," he said.
Recession is not inevitable despite the federal budget heading for deficit, Opposition Leader Malcolm Turnbull says.
"I wouldn't say it (recession) is inevitable at all," Mr Turnbull told reporters in Canberra.
He called on the government to make each part of its reaction to collapsing financial markets "effective" before repeating earlier criticism about the stimulus package delivered late last year.
Mr Turnbull also upped his direct attack on Mr Rudd, labelling him a "born-again socialist" who did not understand the financial crash.
"It sounds like Mr Rudd spent his holidays writing fiction," Mr Turnbull said, referring to a lengthy essay written by the prime minister.
In the essay, the prime minister promises greater government intervention and regulation in the market.
"His remarks about regulation are truly bizarre. From what I've read of his essay it sounds like a feat of imagination," Mr Turnbull said.
"There should always be more good regulation and less bad regulation."
"The critical thing is getting regulation right."
Mr Turnbull reiterated a long list of coalition plans to attack the economy, including wide-ranging tax cuts.
Front page
RSS Feed