Budget 2013: What it means for you

Prime Minister Julia Gillard has defended her government's budget, stating tough choices had to be made.

THE Budget has delivered better funding for school kids but little relief for families.

People with disabilities and entrepreneurs are getting more funding, smokers are getting taxed more, and pensioners stand to benefit from selling their houses.

Find out what the Budget means for you.

If you're thinking of having a baby…

… it's time to get busy. If you don't get pregnant in the next two weeks you won't get the Baby Bonus. It's being scrapped from March 1, 2014, or in nine months and two weeks, and will be replaced with an increase to the rate of Family Tax Benefit Part A. For families not claiming Paid Parental Leave, FTB-A will be increased by $2000 following the birth or adoption of a first child and by $1000 following the birth or adoption of a second or subsequent child.

If you have school children…

… school reforms mean they will get more funding. From January 1, 2014 schools will be funded per student, with primary schools getting $9271 per child and high schools getting $12,193 per child. Students with disability, from a low socioeconomic status, non-English speaking or Indigenous background, or attending a regional, remote or small school will benefit from extra funding on top of the base amount.

Schools will be funded per student from January 1, 2014. Source: Supplied

If you're a pensioner…

… you should sell your family home next year. From July 1, 2014, pensioners who have owned their family home for at least 25 years and who decide to downsize will have the option to invest surplus funds (up to $200,000) in an account. The funds invested in the account and earned interest will be exempt from the Age Pension means test for up to 10 years.

If you're a single parent…

… you will no longer lose eligibility for a Pensioner Concession Card (PCC) if you earn too much money from employment. For a period of 12 weeks you will be eligible for a PCC even if you don't qualify for Parenting Payment Single because your youngest child has turned eight or you do not qualify for a benefit due to earnings from employment.

From January 1, 2014 single parents studying while on the Newstart Allowance will receive up to $62.40 a fortnight under the Pensioner Education Supplement (PES) to help with the costs of study while they gain an initial qualification to assist them to re-enter the workforce.

If you need child care…

… the maximum amount of the Child Care Rebate that can be paid to you will remain at $7500 a year until June 30, 2017. No new measures will make child care cheaper for you personally, but investments are being made to improve childcare quality. The Government will provide up to $300 million over two years to help day care centres to attract and retain qualified professionals through wage increases. The Government will also provide $12.9 million over three years to trial flexible child care arrangements for families who require care outside standard operating hours.

If you receive the Newstart Allowance…

… from July 1 2015 you will be able to earn $100 a fortnight before your payments are affected, up from the current level of $62. This means recipients will be able to keep up to an extra $494 of their income from part-time work over a year.

If you have a disability…

… you will benefit from $19.3 billion in funding over seven years from 2012-13.

If you have cancer…

… an extra $29.6 million will be provided to support the dispensing of chemotherapy medicines in 2012-13 and 2013 14. Overall the Budget provides $226 million to improve cancer prevention, detection, and research, and provide better patient care and support. Measures include a new Australian Prostate Cancer Research Centre, funding for bone marrow transplants and for the Youth Cancer Network program run by CanTeen, and money to improve the treatment for people affected by lung cancer. The Government will also expand the age range for the BreastScreen Australia and introduce more bowel cancer screening.

Medical practitioners are being encouraged to move to regional and remote communities. Source:

If you're a doctor…

… you might want to think about moving to the country. The government is making a $33.8 million further investment into the General Practice Rural Incentive program in 2013-14 to encourage medical practitioners to move to regional and remote communities.

If you're a university student…

… thinking about doing a post-grad degree you're in luck. The government is spending $97 million from 2014 to 2017 for additional Commonwealth-supported sub-bachelor and postgraduate places.

But there's no use banking on a Student Start-up Scholarship next year as the program has been scrapped. Instead the Government is offering loans to students if you receive Youth Allowance, Austudy or ABSTUDY, so you will have to pay the money back. The 10 per cent HECS-HELP up-front payment discount has also been abolished.

If you're an apprentice…

… you might want to look for work at a large company in an industry facing skill shortages.

Grants of up to $50.6 million will be provided to peak industry bodies and large employers to develop training programs for approximately 4000 apprentices over four years. An additional $2000 per apprentice will be available for employers to encourage their participation in the program.

If you live overseas…

… but still access family and parental payments the amount of time you can spend abroad has been cut from three years to one year, starting on July 1, 2014. Affected payments include Family Tax Benefit Part A, Schoolkids Bonus and Paid Parental Leave. Australian Defence Force and Australian Federal Police personnel deployed overseas will not be affected.

If you're a farmer…

… assistance is coming your way. As part of the National Drought Program Reform, the Government is investing $99.4 million for a new Farm Household Allowance, which will support farmers in hardship. The Government will also provide a package of measures to support and assist farmers experiencing acute levels of debt and to help improve their ongoing financial resilience.

If you're an Indigenous Australian…

… studying at school you could be eligible for a scholarship through the Achieving Results Through Indigenous Education (ARTIE) program. The scheme has $4.4 million worth of funding allocated over four years from 2012-13 and will be expanded to benefit around 1,900 students per year in schools in Townsville and Queensland.

Students entering Year 7, 8, and 11 this year will be eligible for additional Indigenous Youth Leadership Program scholarships under a separate budget measure, which are designed to recognise that these are key transition years.

Small business owners will also have potential to access $7.2 million worth of funding over three years to improve the capacity of their companies to engage in the digital economy and take advantage of the National Broadband Network (NBN).

Grants will be provided to large employers to develop training programs for about 4000 apprentices. Picture: Clark Peter Source:

If you're a smoker…

… the price of a pack of 25 cigarettes will cost you about 7 cents more from 2014. The Government will work out taxes on based on average weekly incomes rather than the Consumer Price Index (CPI). This is to ensure tobacco excise keeps in line with income growth.

If you're a foreign worker…

… wanting to apply for a 457 Visa - do it in the next six weeks. From July 1, 2013 you will be hit with a visa application charge of $900.

Your boss will also be under closer watch, with the Government providing $3.4 million over four years to enable the Fair Work Ombudsman to monitor and enforce employer compliance with 457 visa conditions.

If you pay tax…

… a number of tax offsets are being scrapped. The Government will phase out the net medical expenses tax offset (NMETO). The NMETO will only remain available for taxpayers for out of pocket medical expenses relating to disability aids, attendant care or aged care expenses, and this is only until July 1, 2019. The Government is also restricting work-related self-education expense deductions, putting an annual $2000 cap on these expenses from 1 July, 2014.

If you're an entrepreneur…

… the Government is now investing $378.6 million to stimulate private sector investment in entrepreneurial SMEs. New measures will include improving tax arrangements to encourage investors to back Australian businesses, a program to help SMEs bid for public sector work, $350.0 million for a new round of the Innovation Investment Fund (IIF) program to stimulate venture capital investment and money to promote success stories in the Australian innovation system.

If you're a veteran…

… you will have expanded access to mental health services. A $26.4 million investment over four years extended to current and former members of the Australian Defence Force and their families.

If you're a flood victim…

… in Queensland the Government will provide $69.9 million over five years (including $7.6 million in 2012-13) to assist communities that were adversely affected by flooding that occurred in early 2013. This includes concessional loans of up to $650,000 to eligible businesses and primary producers who have suffered extreme damage.

If you're a retiree...

... there will be a new 15 per cent tax on super fund earnings above $100,000 per year from July 1, 2014. Australians with superannuation income above $300,000 will also have with their tax concession halved to 15 per cent. For people still contributing to their super, the tax free threshold on contributions has been increased to $35,000 from $25,000, but only for Australians aged above 60 from July 2013, and for those aged above 50 from July 2014. For low income earners, those who earn up to $37,000 a year will effectively pay no tax on super, thanks to a tax cut of up to $500.

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Budget 2013: At a Glance

Business and economics stalwart Terry McCrann delivers his verdict on Wayne Swan's sixth federal budget.

HERE are the changes to the Federal Budget in 2013, which could affect you. Take a look at Treasurer Wayne Swan's announcements.

ECONOMY:

$18b deficit in 2013

Budget to be in balance in 2015/16 with a $6.6b surplus in 2016/17

Retirees looking to downsize will benefit from a tax change delivered in this year's budget.

Unemployment in 2013/14 up to 5½ per cent

GDP growth of just 2½ per cent in 2013

$43b savings identified over the next four years

FAMILIES:

Scrapping the Baby Bonus from March 1, 2014 will save $2.4b over four years

Scrapping an increase to the Family Tax Benefit Part A: will save $2.5b over four years

But Family Tax Benefit A recipients will get payment boost of $2000 for first child and $1000 for subsequent children, to be paid in instalments

The childcare rebate will continue to be capped at a total of $7500 per year for the next four years

HEALTH:

Saving $1.7b by making Australians pay more out-of-pocket Medicare costs

$14b total hospital funding (Federal and States combined)

$12.1m for a national register for prosthetics including breast implants

$226m for cancer initiatives

$691m on new drug listings on the PBS

$10m for an election year Medicare Locals advertising campaign

Tobacco excise to be indexed to CPI pack of 25 cigarettes up 7c in the first half of 2014

EDUCATION:

$9.8b in new school funding (over 6 years)

$1.1b in early childhood education

$97m on Commonwealth-supported university places

DISABILITY:

$19.3b over seven years for Disability Australia

Partially funded by an increase in the Medicare levy from 1.5 to 2 per cent worth $11.6b over four years

460,000 Australians to be eligible by the full roll-out in 2018

PENSIONERS/AGED:

$127m on senior citizen engagement programs

$112.4m on exempting Aged Pension recipients from the means test if they are downsizing the family home

Broadband for Seniors program expanded at cost of $9.9 million

New $4.6 million institute for ageing will investigate challenges and opportunities of ageing population

INDIGENOUS AUSTRALIANS:

$777m on Closing the Gap initiatives

INFRASTRUCTURE:

$24b total spending over four years

Major road projects -

QLD: $4.1b Bruce Highway, $715m Brisbane Cross River Rail

NSW: $1.8b Sydney Motorways

VIC: $3b Melbourne Metro

SA: Adelaide South Road

WA: $418m Swan Valley Bypass Perth

JOBS:

$1b on the Plan for Australian Jobs, including $69m for Alternative pathways to the Trades

Newstart recipients to be able to earn $494 a year from work without losing any benefits

CARBON TAX:

$13.8b write-down in takings from the Carbon Tax and Mining Tax

$3.7b from the Carbon Tax

$10.1b from the Mining Tax

LAW and ORDER:

$40.9m National Crime Prevention Fund, with proceeds of crime takings to fund community outreach programs

DEFENCE:

Defence spending up by an extra $5.4b between now and 2016

1000 civilian jobs to go

$875m for Afghanistan operations post 2013

$25m extra funding for the Anzac Centenary (total of $140m)

$25m more on veterans mental health

REGIONS:

$9b total spending on the regions

$100m drought reform program

$200m Great Barrier Reef rescue program

$1.9b ongoing support for recovery from the Queensland floods

IMMIGRATION:

Bill for asylum seeker management almost $2.9b in 2013-14

Last budget the forecast for 2013-14 was just over $930m

Up to $375m in aid will be diverted to asylum seeker management under a new cap

457 visa war by government to be continued with an application fee increase to net the government $198m

ARTS:

$129m for the ABC to expand its news and current affairs outside the major cities

$21m subsidy to Disney Films for the making of 20,000 Leagues Under the Sea: Captain Nemo

$75.3 million to reformed Australia Council to support the Arts

COMMUNICATIONS:

NBN advertising spend boosted ahead of poll by $5m

Small business and councils to get NBN help

Satellite Phone Subsidy Scheme extended to June 2014

SUPERANNUATION:

Super contributions up to 9.5 per cent from July 1

Contribution cap of $35,000 for over 60s brought forward to July 1

3.6m Australians with incomes under $37,000 to pay no tax on their contributions

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What the Budget means to you

IT may sound odd, but for many the good news in this Budget is that you're not being slugged (well, not this year). But you're not getting a whole lot either.

In a rarity in recent years, no-one's tax has been increased - or decreased.

Still, middle and lower-income families are going to miss out on promised payments. And the value of ongoing assistance will be eroded.

Here, Cost of Living Editor John Rolfe and Your Money Editor Anthony Keane pair with PwC Australia Economics and Policy Leader Jeremy Thorpe to explain how the Budget affected households.

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Budget cracks whip on big business

Picture: Ray Strange Source: News Limited

Big business is the target of a crackdown on so-called tax loopholes that is expected to deliver $4 billion in budget savings.

Multinationals, banks and miners were named as culprits in Tuesday's budget for practices that were eroding the government's tax receipts.

The government's changes will prevent foreign multinationals artificially loading debt into their Australian operations and claiming tax deductions.

The government will also make it more difficult for miners to claim up-front tax deductions on exploration work that they never carried out, when the discovery was made by another miner that has sold them the rights.

Foreign miners and other investors are also being targeted for not paying foreign resident capital gains tax, by taking 10 per cent of the sale proceeds from the purchaser of Australian property.

Other targets included banks shifting income offshore to reduce tax and sophisticated investors carrying out 'dividend washing', or repeatedly claiming tax benefits on dividend payouts.

Mr Swan denied that big business was a soft target in his government's efforts to make budget savings, saying he supported an economy with strong demand, profitable businesses and Australians in work.

Those areas targeted were being abused, he said. Treasury said the crackdown would save just more than $4 billion over four year, and ensure stable revenue to fund vital investments in Australia.

"If some taxpayers do not pay their fair share of tax, a higher tax burden will fall on Australian families and small businesses,'' it said.

A $17 billion write down in expected tax receipts over the 2012/13 financial year has been a major hit to the budget's bottom line.

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Families hit in $43b Budget grab

Business and economics stalwart Terry McCrann delivers his verdict on Wayne Swan's sixth federal budget.

Treasurer Wayne Swan delivers his Budget speech to the House of Representatives. Picture: Gary Ramage Source: News Limited

Budget 2013: Treasurer Wayne Swan delivered his Budget speech to the House of Representatives and the Australian people on Tuesday 14th May 2013, in Parliament House in Canberra. Picture: Gary Ramage Source: News Limited

FUNDS for families will be scythed by close to $5 billion as the government sets out to harvest $43 billion in spending cuts over four years, the Budget reveals.

It will be a bitter harvest for many voters in an election year, with extra household expenses for a range of activities - from having a baby to having a cigarette.

What do you think of the Federal Budget? Tell us below

Family-based payments will be cut by about $2.5 billion over four years and the pause in indexation of Family Tax Benefit-A continued, forestalling any rise in its benefits.

Health costs will rise. Some $1.7 billion will be saved over four years by starting the Medicare safety net after $2,000 in personal expenditure rather than the current $1,200; delaying moves in the rebate on fees for seeing a doctor; and phasing out a medical expenses tax offset.

This will be in addition to the 0.5 per cent increase in the Medicare levy, already announced, to contribute $20.4 billion over five years to the national disability scheme.

The biggest single change is the abolition of the Baby Bonus, which will be replaced by extra concessions under Family Tax Benefit-A - received by middle-income families with total incomes of up to $112,000 a year. This would save about $900 million over four years by effectively means-testing the assistance.

The new scheme will start in nine-and-a-half months.

And the excise on cigarettes will go up by about seven cents a packet of 25. Indexation of the excise will be linked to movements in average wages, rather than to the lower Consumer Price Index.

Even self-improvement will cost more. The government wants to cap the tax deduction for work-related self-education at $2,000 a year.

One piece of good news was a program to help older people move out of family homes -- which often are too big for them -- and keep the proceeds of their sale without their aged pension being affected.

The Coalition slammed the budget, saying it showed the nation's finances were in "complete chaos" and that Labor could not be trusted.

Shadow treasurer Joe Hockey said the flawed strategy included more broken promises on family payments, higher taxes, debt levels breaching the $300 billion ceiling and "no credible path back to surplus".

"Budget 2013 delivers more debt, more deficits, more taxes, more broken promises and more uncertainty from an incompetent Labor Government that can't be trusted,'' Mr Hockey said.

"(It) confirms that Labor's financial and budget management is in complete chaos."

The Budget also outlined plans for $24 billion in road and rail projects in capital cities. Just $4 billion will be spent in the next four years, with the remainder forward spending planning.

But that was a relatively lonely item of good news in a Budget which was dedicated to wide spending reductions and long-term funding of projects Treasurer Wayne Swan said were fundamental to the nation's future.

Treasurer Swan outlined significant objectives to justify the pruning and, he hopes, to convince voters extraordinary measures are needed during extraordinary economic times.

The aim is to pay for extra school funding under the Gonski scheme and provide for the disability insurance scheme. Plus, Mr Swan wants to get the Budget back in balance by 2015-16. But first the government would have to overcome a $19.4 billion deficit for 2012-13 and a projected deficit of $18 billion for next financial year, 2013-14.

Mr Swan said he would not want voters to think "that we were going to dog the task of actually stumping up the money for doing the school improvement program, or (that) we couldn't really provide for the peace of mind and stability that was required for Disability Australia to be funded".

"I couldn't live with myself if that was the approach I took," he told reporters, insisting the September 14 election was not a consideration.

But he said, "We understand there will be some people who are unhappy about this (baby bonus) decision."

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Budget changes one tweak at a time

Federal Treasurer Wayne Swan will deliver the 2013 Budget. Picture: Kym Smith Source: National Features

TONIGHT'S Federal Budget is likely to contain more disappointment than pleasant surprises for the small business sector.

The Government has already laid out its sweeteners - the carry-back of losses to offset profits, a $6500 instant tax write-off and a Small Business Commissioner - but Institute of Chartered Accountants head of tax policy Paul Stacey says "tweaking" may result in a pull-back of benefits.

He says the Government is likely to tighten the ability of small businesses to transfer trust losses, a practice used by family businesses that was the source of much interest during Budget Estimates.

"From my perspective, I wouldn't expect too much from the Budget, except maybe a tweak here and a tweak there," he says.

"Changes in the individual tax system will also impact (unincorporated) business owners as they will have changed rates, as will the changes to the Medicare Levy.

"But I do expect them to tighten the trust loss rules. Treasury doesn't like them, they are treated as a concession and it's there in black and white in the Budget Estimates; that's what I think it is on the table."

The head of the Council of Small Businesses of Australia, Peter Strong, is much more optimistic.

Resources helping small businesses enter the Asian Century and take advantage of the National Broadband Network and an increase in the instant tax writeoff would cost little, he says.

Similarly, expanding training beyond its large business emphasis could improve the health of the struggling retail, small manufacturing and construction sectors, he says.

However, the Government could best make a "low budget" change by giving one person responsibility for small business superannuation complaints, he says. Industry funds are placing greater and greater demands on small businesses, some of which were misleading and wrong, he says.

"It wastes time, it wastes money and gets in the way of running a business," Strong says. "It is debilitating."

There is speculation an existing regulatory body could take over the role at little cost to resolve a growing problem.

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Investors cautious before Budget

CAUTIOUS investors worried about surprises in tomorrow's Federal Budget are expected to rein in any boost offered by record highs on overseas markets.

Futures markets were tipping Australian shares would have a tepid start, despite robust growth in US and European equities on Friday.

Global equity markets were upbeat as Group of Seven finance chiefs met in Britain. The American Dow Jones Industrial Average and Germany's DAX 30 set new records.

The positive sentiment buoyed the US dollar, causing the Australian dollar to briefly dip below parity on Saturday morning, to 99.61 US cents.

At the G7 summit, British finance minister George Osborne said nations were finding "common ground" in their efforts to bolster their economies. "

Commonwealth Securities chief economist Craig James said investors are likely to take a cautious approach before the Budget.

- with AAP

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The budget cuts Swan must make

Treasurer Wayne Swan faces some tough choices if he wants to reduce the Budget deficit, say top economists. Picture: Kym Smith Source: News Limited

CUTS to airport security, axing the baby bonus, boosting petrol excise and lifting the age at which people qualify for the aged pension are just some of the of controversial savings measures economists say are needed to balance the federal budget.

Amid predictions the budget will be in deficit for a decade, News Limited asked some of the nation's top economists to nominate where the budget savings are hidden.

The economists expect a budget deficit of about $20 billion this financial year, and about $10 billion the next.

They want the government to focus on cutting spending and closing tax loop holes and are hesitant about increasing tax rates.

Scroll down to see the complete list of suggested savings

"I do not want to see any increases in rates of tax," the chief economist at Bank of America Merrill Lynch Australia Saul Eslake said.

The chief economist at AMP Capital, Shane Oliver, agrees: "Given the need to boost the economy's productive potential, budget savings should be focussed on spending cuts, not tax increases."

Dr Oliver wants the government to cut middle class welfare, industry subsidies, broadband spending and encourage greater private sector involvement in infrastructure projects.

"It is clear that total Government spending does need to be cut," Dr Oliver said.

Mr Eslake wants the government to tighten tax concessions on negative gearing, capital gains, family trusts, superannuation payouts for over 60s and abolish the Senior Australians' Tax Offset.

Economist Saul  Eslake says  the cost of airport security measures must be weighed against the hassle caused to travellers. File picture: Jane Hansen

He also wants the GST applied on food and a Medicare-style levy to pay for the National Disability Insurance Scheme. "What sort of insurance scheme has no premiums?" he said.

Mr Eslake said the Boston bombings showed that huge spending on homeland security was no guarantee against terrorism. And the cost of airport security measures must be weighed against the hassle caused to travellers.

"We employ a small army of people to do such utterly pointless tasks as confiscating shaving cream and duty free booze, waving magic wands over laptops, making female passengers remove and replace their boots, and harassing old folks with hip replacements, none of which have ever been shown to have posed the slightest risk to the travelling public."

The chief economist at JP Morgan, Stephen Walters, expects the budget will return to surplus in 2015-16, but says Australia would not lose its AAA credit rating if it did not. However, "from a fiscal credibility perspective ... there needs to be a plan that shows the Budget path is a return to surplus," he said.

Mr Walters would cut middle class welfare, reduce concessions on super, cut the bureaucracy, increase the rate of the GST, reinstate indexation of the fuel excise and lift the Medicare surcharge to encourage people to take out private health insurance.

An economist at The Eureka Report, Adam Carr, said paying off debt would save the budget $12 billion a year in interest charges. Mr Carr would remove all industry assistance, cut social security and welfare and increase the GST, the mining tax and the petroleum resource rent tax.

The author of Debunking Economics, Professor Steve Keen, thinks the budget won't be back in surplus until 2025. But this, he says, is not a problem.

"We have a surplus fetish in this country, and obsess about a deficit that is substantially smaller than applies in most of the developed world," he said.

Professor Keen wants to abolish negative gearing, axe first home buyer grants and tax capital gains at a person's income tax rate.

The chief economist at HSBC, Paul Bloxham, also does not expect a surplus in the next four financial years and is calm about the prospect. In the longer term, Mr Bloxham would lift the rate of the GST and apply it on more things like food. He would also increase the mining tax and the age of qualification for the pension.

Labor has already announced the eligibility age for the age pension will rise from 65 would rise to 67, phased in between 2017 and 2023.

CUT THE FAT: Budget savings measures recommended by economists

Welfare:

BIN the baby bonus

AXE the Schoolkids bonus

TIGHTEN eligibility for social security and welfare payments

RAISE the eligibility age for the age pension

EXTEND the income test for the age pension to include super earnings

ABOLISH the Senior Australians Tax Offset which discriminates by age, not income

Health:

INTRODUCE a Medicare-style levy to fund the disability insurance scheme

END the private health insurance rebate

INCREASE the Medicare Levy Surcharge to encourage people to take up private insurance

Industry & Infrastructure:

SCRAP industry assistance

SAVE on infrastructure costs by encouraging greater private sector involvement

Property:

ABOLISH negative gearing of property

GET RID OF first home owners grants

DITCH the discount on capital gains

Public sector:

REDUCE bureaucracy

CUT spending on security, including airports and security agencies

TRIM interest payments by retiring debt

Tax:

RAISE the rate of the GST and apply it to a wider range of goods like food

BOOST the rate of the mining tax and apply to a wider range of commodities

UP the rate of the Petroleum Resources Rent Tax.

REINSTATE indexation of the fuel excise

CRACKDOWN on use of family trusts to avoid tax

TIGHTEN tax concessions on super.

Email: jessica.irvine@news.com.au Twitter: @Jess Irvine

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Budget: Welfare 'could be targets'

TAX revenue will have collapsed by $12 billion by the end of June, according to Treasury forecasts of plummeting company profits.

The shrinking revenue confirms the May 14 Budget will include extensive spending cuts. The Government
promises the cuts will not be so harsh that they will cost jobs and stunt economic growth, which has raised
speculation welfare and tax concessions could be targets for cuts.

So far the Government has indicated that only plans for increased school funding and a national disability
insurance scheme will be protected.

The Treasury forecast means the money collected by the Federal Government will be $12 billion less - across a four-year period - than forecast just seven months ago in the October Budget update.

Treasurer Wayne Swan revealed a week ago a $7.5 billion "sledgehammer" had crashed through anticipated tax revenue.

Prime Minister Julia Gillard today reveals that a further $4.5 billion will be added to the shortfall by the
end of the financial year in just three months.

The Prime Minister's speech to an economic conference in Canberra today is set to promise a plan to respond to "the huge reductions in revenue growth over the next four years" caused in part by the high exchange rate of the Australian dollar which is making exports less competitive.

Outlining the problem, Ms Gillard is expected to say the profits and consequent tax revenue slump was caused by the fact "the prices for what Australian companies sell overseas are lower, imports are cheaper, local competition is fierce".

"Those things add up to business making less profit than planned," her speech says.

"That puts pressures on our stable and resilient economy and it is one reason businesses and workers still
need to work so hard to get ahead.

"When businesses make less profit than planned, it also means Government gets less money in tax than
expected.

"That's the big challenge for the nation in this Budget – and it defines the decisions the Government's
confronting as we put the Budget together."

Ms Gillard will say that while the Budget will be tough it will "make necessary investments in the nation's
future, to ensure that none of our people are left behind".

"We won't, during this time of reduced revenue, fail the future by not making the wise investments that will
make us a stronger and smarter nation," says her prepared speech.

"Better school funding and school improvement will not be jeopardised.

"Our nation cannot afford to leave children behind or to leave our nation's future economy limping behind
the pack, unable to attract the high wage, high skill jobs of the future.

"And we won't fail to make the wise investments that make us a fairer nation.

"DisabilityCare must not be jeopardised.

"A fragmented, unfair, inefficient system hurting 400,000 Australians with disability and their families and
carers – and putting at risk anyone who could acquire a disability – cannot be left in place."

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Obama debuts budget in fiscal showdown

TO Republican mockery, President Barack Obama rolled out a $US3.77 trillion ($3.61 trillion) budget overnight that laid out his battle lines in a new fiscal showdown in Washington but irked some liberal allies.

Mr Obama said his blueprint for fiscal year 2014 would shield the middle class by closing tax loopholes that help the rich, would grow the economy, cut the deficit, train future American workers and protect seniors.

"For years, the debate in this town has raged between reducing our deficits at all costs and making the investments necessary to grow our economy," he said on an unseasonably warm morning in the White House Rose Garden. "This budget answers that argument, because we can do both. We can grow our economy, and shrink our deficits."

Republicans however immediately rejected Mr Obama's plans. Senate Minority Leader Mitch McConnell branded them as a "left wing wish list".

House Speaker John Boehner, who has already passed a Republican budget that slashes spending, warned that Mr Obama had already made life tough enough on the rich, adding: "we don't need to be raising taxes on the American people."

Mr Obama's spending plan for 2014 is in many ways an academic exercise, given that it has no chance of being fully enacted in stalemated Washington.

But it will stand as his entry in the latest fast-building showdown pitching the president's plan to hike taxes on the most well off against Republican plans to slash government spending with no new revenues.

"We don't view this budget as a starting point. This is an offer where the president came more than half way towards the Republicans in an attempt to get a fiscal deal," said a senior White House official.

"Are Republicans going to be willing to come to us?" the official asked, ahead of the unveiling of the budget at a time hope has faded for a "grand bargain" deal on the deficit between Mr Obama and Republicans.

The blueprint included one key concession to Republicans, which has already angered elements of Obama's liberal Democratic base.

Mr Obama signalled he is ready to modify some cherished entitlement social programs, by adjusting cost of living adjustments that could trim benefits for some senior citizens.

The move, ahead of a second dinner between Mr Obama and Republicans at the White House today, was intended to try to lure some support for cross party budget and deficit talks.

The White House is billing the budget as a document which proves that the need to cut voluminous deficits does not need to be achieved by savage cuts in government spending and social programs envisaged by Republicans.
Officials say the plan includes $US1.8 trillion of deficit reduction over 10 years and would raise $US580 billion dollars in new revenue by curbing income tax breaks for the rich, without raising rates.

It would raise the tax on a pack of cigarettes from $US1.01 to $US1.95 per pack to finance an early childhood education scheme.

The budget would also provide $US1.65 billion for the Global Fund to Fight AIDS, Tuberculosis and Malaria and $US4 billion to allow security upgrades following the attack on the US consulate in Benghazi last September.

Republicans dispute Obama's deficit reduction figures, arguing that since the budget would dispense with $US1.2 trillion in automatic spending cuts, which began in March and are known as the sequester, its real deficit reduction figure would only be $US600 billion in savings.

Among measures that had already been opposed by Republicans, the Obama budget would implement the "Buffett Rule" which would mandate that households making more than a million dollars a year pay at least 30 per cent of income in taxes.

The budget foresees a deficit of $US744 billion, or 4.4 per cent of GDP, in 2014 - down from a projected deficit of $US973 billion this year.

Officials projected that the shortfall would reach 2.8 per cent of GDP by 2016 and 1.7 per cent by 2023.

The plan assumes unemployment will average 7.2 per cent next year, down from the current 7.6 per cent.

Economic growth meanwhile is predicted to pick up to 3.2 per cent next year, from 2.3 per cent this year.

The White House says that the plan represents more than two dollars in spending cuts for every one dollar of new revenue accrued from closing tax loopholes.

It also includes $400 billion in health savings that administration officials say could be found by cracking down on fraud.

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Dow hits 5-year high despite budget mess

Beware of the latest share-buying spree Source: Supplied

THE Dow Jones Industrial Average reached a new five-year high overnight as investors looked past the risks to the economy of impending federal spending cuts and bid up equities.

The Dow jumped 35.17 points (0.25 per cent) to 14,089.66, less than 100 points from all-time high of 14,164.53 on October 9, 2007, ahead of the markets crash and the Great Recession.

The broad-based S&P 500 increased 3.52 (0.23 per cent) to 1518.20, while the tech-rich Nasdaq Composite Index gained 9.55 (0.30 per cent) to 3169.74.

Overnight trading came as $US85 billion ($83.67 billion) in spending cuts were to begin taking effect, as Washington policy makers failed to agree on a compromise for a more moderate deficit reduction program.

"Markets are learning to deal with this kind of uncertainty and so they don't get rattled around with every gyration in fiscal policy," said Paul Edelstein, an economist with IHS Global Insight. "US data has been very good this week and monetary policy has been very supportive."

Fresh data that showed consumer spending rose in January at double the rate of December, despite lower personal income.

Markets were further cheered by a report that showed US manufacturing activity hit the highest level since 2011. Of the 18 manufacturing industries surveyed, 15 reported growth, compared with 13 in January.

Apple shares tumbled 2.5 per cent after a US judge invalidated some $US450 million of a $US1 billion award to be paid by Samsung to Apple in a much-watched patent lawsuit. More litigation in the case is expected.

Best Buy picked up 4.0 per cent after it topped earnings expectations, even as it reported a decline in same-store sales.

Separately, the company announced that the deadline had passed for founder Dick Schulze to submit his expected offer to buy the company.

Clothing retailer Gap climbed 2.8 per cent after reporting profits and revenues above forecast levels, and boosting its dividend.

Deckers Outdoor, which sells the popular UGG and Teva brands of shoes, soared 15.4 per cent after announcing record annual revenues.

Groupon, the online discount coupon distributor, rebounded 11.4 per cent after yesterday's 24.3 per cent plunge on forecasts of continuing losses in the current quarter. The company replaced its chief executive with a management team from the board of directors.

Bond prices rose. The yield on the 10-year Treasury bond declined to 1.85 per cent from 1.89 per cent yesterday, while the 30-year retreated to 3.07 per cent from 3.09 per cent. Bond prices and yields move inversely.

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Obama wants 'balanced' budget cuts

President Barack Obama heaped blame on Republicans on Friday for the failure to break a deadlock in efforts to avert looming automatic spending cuts and warned that a "ripple effect" would start hurting the middle class and the overall U.S. economy. Deborah Lutterbeck reports.

WITH spending cuts now etched into law, US President Barack Obama urged Congress to find a deficit-trimming ways that avoids using a 'meat cleaver'.

Mr Obama advocated what he called a balanced approach to replace across the board cuts of $US85 billion ($83.6 billion) in federal spending this year, blending "smart" cuts with reforms.

The so-called sequester mandated cuts were never actually meant to go into effect when it was fashioned in a deal with Congress in 2011.

The drastic cuts are not expected to be immediate or uniform across the country or from one government department to another.

Economists have warned that the cuts could cost many jobs and hinder growth in the still fragile US economy. But the realisation is sinking in that despite the perils they bring, the cuts are here to stay - at least for now.

In his weekly radio and internet address on Saturday, the president argued however there was still time to find a smarter solution to the nation's deficit and debt problem.

"I still believe we can and must replace these cuts with a balanced approach - one that combines smart spending cuts with entitlement reform and changes to our tax code that make it more fair for families and businesses without raising anyone's tax rates," Mr Obama said.

These were allusions to Mr Obama's willingness to trim spending on programs like medical care for the elderly and the poor, something which is anathema to many in his Democratic Party, and Mr Obama's drive to close tax loopholes he says benefit the rich.

Republicans, who ceded to Mr Obama in another budget showdown late last year and allowed taxes on the rich to go up, have said point blank that any deficit reduction now has to come from spending cuts, exclusively.

US President Barack Obama gestures as he speaks about automatic defense budget cuts.

Mr Obama said the budget deficit now exceeding $US1 trillion can be reduced without laying off workers or forcing parents and students to pay the price.

Under the sequester, 800,000 civilian employees of the Defense Department will go on a mandatory furlough one day a week and the navy will trim voyages.

Cuts will also be made to special needs education and preschool for less well-off children. National parks could close and wait times could hit four hours at airport customs posts.
 

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Dow hits 5-year high despite budget mess

Beware of the latest share-buying spree Source: Supplied

THE Dow Jones Industrial Average reached a new five-year high overnight as investors looked past the risks to the economy of impending federal spending cuts and bid up equities.

The Dow jumped 35.17 points (0.25 per cent) to 14,089.66, less than 100 points from all-time high of 14,164.53 on October 9, 2007, ahead of the markets crash and the Great Recession.

The broad-based S&P 500 increased 3.52 (0.23 per cent) to 1518.20, while the tech-rich Nasdaq Composite Index gained 9.55 (0.30 per cent) to 3169.74.

Overnight trading came as $US85 billion ($83.67 billion) in spending cuts were to begin taking effect, as Washington policy makers failed to agree on a compromise for a more moderate deficit reduction program.

"Markets are learning to deal with this kind of uncertainty and so they don't get rattled around with every gyration in fiscal policy," said Paul Edelstein, an economist with IHS Global Insight. "US data has been very good this week and monetary policy has been very supportive."

Fresh data that showed consumer spending rose in January at double the rate of December, despite lower personal income.

Markets were further cheered by a report that showed US manufacturing activity hit the highest level since 2011. Of the 18 manufacturing industries surveyed, 15 reported growth, compared with 13 in January.

Apple shares tumbled 2.5 per cent after a US judge invalidated some $US450 million of a $US1 billion award to be paid by Samsung to Apple in a much-watched patent lawsuit. More litigation in the case is expected.

Best Buy picked up 4.0 per cent after it topped earnings expectations, even as it reported a decline in same-store sales.

Separately, the company announced that the deadline had passed for founder Dick Schulze to submit his expected offer to buy the company.

Clothing retailer Gap climbed 2.8 per cent after reporting profits and revenues above forecast levels, and boosting its dividend.

Deckers Outdoor, which sells the popular UGG and Teva brands of shoes, soared 15.4 per cent after announcing record annual revenues.

Groupon, the online discount coupon distributor, rebounded 11.4 per cent after yesterday's 24.3 per cent plunge on forecasts of continuing losses in the current quarter. The company replaced its chief executive with a management team from the board of directors.

Bond prices rose. The yield on the 10-year Treasury bond declined to 1.85 per cent from 1.89 per cent yesterday, while the 30-year retreated to 3.07 per cent from 3.09 per cent. Bond prices and yields move inversely.

View the original article here