By Wayne Cole
SYDNEY (Reuters) – Australia’s government budget deficit will undershoot market forecasts and keep improving over time, Treasurer Joe Hockey said – just hours before delivering his annual policy package.
Speaking to the media, Hockey said the market was forecasting a shortfall of around A$40-A$41 billion but the actual deficit would “beat that”.
Hockey said the government had been forced over the past 18 months to write off A$90 billion of expected revenue, partly due to a slide in prices for iron ore, the country’s biggest export earner.
“Yet we are still on a credible trajectory back to surplus,” said Hockey.
Prime Minister Tony Abbott’s conservative government is taking a far more cautious approach to their second budget after last year’s attempt at slashing spending and welfare proved politically disastrous.
This time all the talk is of a “fair” budget aimed at strengthening the economy and ensuring the “integrity” of Australia’s tax system.
Tax steps include proposals to crack down on alleged tax avoidance by 30 multinational companies in a move that could force the likes of Apple Inc and Microsoft Corp to restructure their businesses to escape huge penalties.
Hockey also plans to extend a 10 percent goods and services tax to cover digitally downloaded products, such as music, books and games.
The government has already announced a A$3.5 billion plan for expanded childcare payments designed to encourage mothers to re-enter the workforce sooner.
Tax concessions to small business are also believed to be on the docket, as well as A$450 million extra to be spent on national security and counter-terrorism.
Abbott and Treasurer Joe Hockey were savaged in 2014 for handing down a budget that aimed to slash spending on social welfare programs in order to rein in spiraling deficits.
Both have promised that Tuesday’s budget will be “boring” in comparison. Selling the plan will be vital for Abbott, who earlier this year narrowly survived a leadership challenge from within his Liberal Party, in resisting pressure to break the deadlock by calling a snap poll.
(This story has been refiled to correct spelling of “rein” in second-last paragraph)
(Editing by Eric Meijer)