$300 million boost for welfare to work schemes

Wayne Swan expects to take a political hit for not delivering a much-promised surplus in Tuesday's budget.

Wayne Swan as Treasurer will deliver the Budget on Tuesday night. Picture: Lyndon Mechielsen Source: The Australian

THE Budget will spend $300 million helping welfare recipients get jobs as it shifts further into a deficit that Treasurer Wayne Swan admits will worry voters.

The biggest allocation, $258 million, will allow about 800,000 welfare recipients to earn an extra $38 a fortnight before their benefits are wound back.

There also will be extra funds for study and training and extended access to a Pensioner Concession Card.

"The Gillard Government believes that the best ticket off welfare is a job, and our reforms will go to the heart of that by removing disincentives for people to work or study while they are on income support payments," said Employment Minister Bill Shorten.

The measures are a further indication the Budget will not include an increase in the dole as welfare groups have been demanding.

Treasurer Wayne Swan today is preparing to deliver a Budget splashed with red ink he knows will worry voters but which he says will reinforce the national economy.

Asked if the public worry about a Budget with a deficit of around $20 billion Mr Swan told news.com.au: "I think they do a bit.

"But if they thought about it like they think about their housing loan they wouldn't worry about it as much."

The Treasurer wants a return to surplus "at a measured pace" which indicates more shortfalls to come.

"The thing is our debt is very small," he told news.com.au.

"The fact is that for a time running deficits is a very good buffer while you strengthen your economy and ride out the temporary ructions that come along."

A measured return to a balanced Budget was also supported by a senior business spokesman, Innes Willox of the Australian Industry Group, who yesterday said a $20 billion deficit would not concern him.

"What the business community is after now is not some masochistic austerity package because that will not allow us to create jobs or growth, but rather a credible, confident pathway forward through to surplus," Mr Willox told ABC's Insiders program.

And independent MP Rob Oakeshott said he also would accept a deficit "if we have a strategy in the long term to deal with the structural issues of tax reform that sets us up for the best standard of living of the future".

But the Opposition said the Budget projections could not be believed because the Government had them so wrong in the 2012-13 Budget.

"Whatever Wayne Swan says on Tuesday night do not believe him. Not based on what I say, but based on what he has said previously compared with what he's actually done," Mr Hockey told Sky News.

"They can't be trusted to keep their word."

The boosted earnings threshold will help those on Parenting Payment Partnered, Newstart Allowance, and Widow, Sickness or Partner Allowance get jobs worth $100 per fortnight, up from $62, before their income support starts to be reduced.

The Budget also will allocate $39.7 million over four years to extend the Pensioner Education Supplement (PES) to all single principal carer parents receiving Newstart.

From 1 January 2014, single principal carer parents receiving Newstart Allowance who take up approved study will be entitled to PES. The supplement is paid at a rate of $62.40 per fortnight or $31.20 per fortnight for a concessional study load.

It is expected that around 25,000 additional single parents will take up the PES over the next four years.  

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Boost to family tax benefits axed

Aussie families will no longer receive the promised boost to family tax benefits. Picture: Thinkstock

THE Government is abandoning its promised boost to family tax benefits because the mining tax meant to fund it has been a dud.

Finance Minister Penny Wong today confirmed the planned $600-a-year top-up pledged in the last Budget would be scrapped in the Budget next week.

"We are not in a position to proceed with the boost to family tax benefits as a result of the revenue challenge that the Government is facing and the nation is facing," Senator Wong told Sky News.

"So this is a difficult decision but a responsible decision given what is happening to revenue."

The backdown will not affect Family Tax Benefit A payments currently received by households. But it means the Government will not have to find about $1.8 billion extra in the Budget.

The abandonment of the promise is a severe embarrassment for the Government. It will be seen as both a breach of faith with voters, and a sign of incompetent economic management.

The Mineral Resources Rental Tax was to have raised about $1 billion this financial year from the profits of big coal and iron ore miners.

However, the decline in ore prices and some legitimate accountancy practices by the miners has meant this target will not be met.

And Government tax revenue generally has been falling so it can't find the funding elsewhere.

"The impact in the current financial year, between last year’s budget and this year’s budget looks to be in the order of $17 billion," the Senator said today.

"So that is a very significant revenue shortfall."

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Stocks firm at noon on US jobs boost

THE share market closed higher as the resources sector staged a recovery after a jump in commodity prices.

CMC Markets chief market analyst Ric Spooner said the Australian market turned its attention away from the high yielding stocks, which had been performing well for some time, to the resources shares.

"The driving factor in today's market was the strength in the much maligned resources sector,'' he said.

"This was due to better than expected US employment figures, which in turn led to a jump in commodity prices particularly for copper and oil.''

BHP Billiton surged 90c to $32.87, Rio Tinto jumped $1.71 to $56.20 and Fortescue soared 20c to $3.61.

However, the four main banks closed mixed with the Commonwealth Bank the only one to end on a high.

National Australia Bank lost 24c to $33.50, ANZ fell 9c to $31.51 and Westpac slipped 38c to $33.17.

Commonwealth Bank gained 61c to $71.67.

Australian Bureau of Statistics figures, released this morning, show that retail spending fell 0.4 per cent for March but was up 2.2 per cent for the quarter.

Mr Spooner said the figures had little effect on the market as they cancelled it each other out and were unlikely to affect the Reserve Bank of Australia's decision on interest rates tomorrow.

Orica shares closed up 36c to $22.56 after the explosives and chemical supplier announced its first half net profit was up 6 per cent to $267 million.

Leighton shares were up 42c to $19.43 after the construction giant still expects to make a full-year profit of up to $600 million after completing what it said was a pleasing first quarter.

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RBA waiting for rate cuts to boost economy

RBA governor Glenn Stevens at a joint committee on the Australian Commission for Law Enforcement Integrity, in Parliament House in Canberra. Source: Supplied

THE Reserve Bank of Australia is waiting to see how recent interest rate cuts flow through the economy before deciding if it needs to cut the cash rate further in 2013.

In the minutes from its February 5 board meeting, released today, the RBA said there were signs the 1.75 percentage points in interest rate cuts delivered between November 2011 and December 2012 were starting to provide a boost to underperforming sectors like housing.

The RBA kept the cash rate on hold at three per cent in February, its equal-lowest level since the global financial crisis.

"Interest rate sensitive parts of the economy had shown some signs of responding to these lower interest rates, which were well below their longer-run averages, and further effects could be expected over time," the RBA said.

"Noting that monetary policy was already accommodative as a result of the substantial easing of policy over the past 15 months, and that this stimulus was continuing to work its way through the economy, the board judged that it was prudent to leave the cash rate unchanged at this meeting."

But it noted the Australian dollar remained "persistently high" and was having a negative impact on some sectors.

The high value of the Australian dollar, along with an expected peak in mining investment during 2013, had earlier prompted the central bank to revise its forecasts for economic growth down to 2.5 per cent for the current calendar year, below its long-term trend.

The RBA said that, with inflation expected to remain within near the middle of its target range of two to three per cent, it had room to cut the cash rate further if needed.

"The inflation outlook, as assessed at this meeting, would afford scope to ease policy further, shout that be necessary to support demand," it said.

The RBA noted that global economic conditions had improved since the start of 2013, with the US avoiding a so-called fiscal cliff of tax hikes and spending cuts, improved economic data from China and the Japanese government announcing policies to grow the world's third-largest economy.

The RBA said iron ore prices had improved significantly during December due to increased demand from China but said the current high levels were unlikely to be sustained.

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