Pruning back stage-three tax cuts, raising the GST and cutting wasteful spending on major defence and transport projects are among a suite of options the government could consider to rein in the budget deficit.
Treasurer Jim Chalmers is due to hand down his second budget in less than four weeks and the spotlight is on how the government plans to ease cost-of-living pressures without fuelling inflation or adding to government debt.
A Grattan Institute pre-budget report presented a number of immediate and long-term options for addressing the deficit.
Without urgent action, the institute warns, Australia is on track for 25 years of deficits, expected to be worth nearly $50 billion every year by 2030.
Among its “menu of options” to reduce spending, the report proposes undoing West Australia’s special deal on the GST and cutting back on spending on politicised grants and advertising.
To increase budget revenue, the institute also recommends re-designing the planned stage-three tax cuts to be less generous to the highest income-earners and introducing better-targeted tax concessions on superannuation.
The treasurer told ABC Radio on Wednesday the government was looking at some of the options, including the possibility of reforming the petroleum resource rent tax.
Treasury is reviewing the tax on the profits of fossil fuel extractors and Dr Chalmers says the agency is working through options to improve how the tax applies to gas producers.
The government has also committed to “modest but meaningful” changes to super tax breaks to target returns on balances over $3 million.
But Dr Chalmers also said there were some things “we won’t be coming at”, including changes to Family Tax Benefit Part B.
The institute said the benefit, designed to help parents who were not in paid work because they were caring for children, was important for supporting single parents but the case for such a benefit for single-income couple families was weaker.
The report said scrapping the benefit could save $1.3 billion a year and remove barriers to workforce participation for the second earner in a couple.
But Dr Chalmers agreed with the overall message in the report that the budget had structural issues.
“Even as the budget gets a bit better in the near-term because of high commodity prices and low unemployment, we’ve got structural challenges that come from the cost of servicing that trillion dollars in Liberal debt, combined with the NDIS and aged care and health care and national security,” he said.
Reforming capital gains tax discounts and negative gearing and increasing the super preservation age were also flagged in the report as opportunities.
As well as an array of more realistic policy options, the institute also flagged a few bolder options for the government to consider, including a carbon tax, inheritance tax and realigning the company tax rates at 30 per cent.
– AAP
