Despite significantly lower tax receipts, this Budget sets a pathway to return the budget to balance in 2015‑16 and to surplus by 2016‑17, while ensuring critical investments are made to secure a stronger, smarter and fairer future for Australia.
Lower tax receipts and weakness in nominal GDP have created a challenging backdrop for this Budget.
Lower tax reciepts
Just as the high dollar is impacting on the profitability of many industries, it is contributing to lower tax collections across the forward estimates.
Since the 2012‑13 Budget, tax receipts have been revised down by around $17 billion in 2012‑13. This brings the total write‑downs in tax receipts over the five years since the 2008‑09 Budget to around $170 billion. Since the 2012‑13 MYEFO, tax receipts have been revised down by around $60 billion over the four years to 2015‑16.
The subdued recovery in tax receipts largely reflects weaker corporate profitability, a slower than expected recovery in capital gains tax and lower receipts from resource rent taxes.
Not only is nominal GDP growth in 2012‑13 well below its long‑run average but the amount of tax collected per dollar of GDP is well below trend. This is expected to impact the tax collections in 2012‑13 and across the forward estimates.
Tax receipts as a share of GDP are expected to be lower than forecast at the 2012‑13 MYEFO. If the tax‑to‑GDP ratio was the same share as in 2007‑08 (23.7 per cent), the year immediately prior to the GFC, tax receipts in 2013‑14
would be around $24 billion higher than currently anticipated.
Getting the big calls right
We have responded to these challenges by setting a pathway to return the budget to balance in 2015‑16 and to surplus by 2016‑17 through responsible savings. Policy decisions made in this Budget will deliver the greatest improvement to the Budget position in nearly two decades.
This strategy enables us to make the investments needed to build a stronger, smarter and fairer future while strengthening the sustainability of Australia's public finances and building on Australia's record of fiscal and economic strength.