Hockey warns more savings needed before bracket creep can be countered

LOOKS like we’ll have to cop high taxes for a while to come, with treasurer Joe Hockey today admitting the country can no longer afford promised tax cuts.

Will we be getting the tax cuts promised?

HOPES for imminent personal tax cuts and Budget sweeteners are being dashed by a government revenue collapse which will shred some key election pledges.

The government is spending $100 million a day more than it gets in revenue, Treasurer Joe Hockey said today.

The shrinking tax take from resources exports — a victim of a global drop in mineral prices — means Tony Abbott’s government will not be able to produce a Budget surplus in its first term as promised.

The magnitude of that revenue collapse could be as great as $500 billion over 10 years, according to forecasts by Goldman Sachs.

Foreshadowed income tax cuts to be offered at the 2016 election to counter the fall in the buying power of wages caused by inflation — bracket creep — are in doubt.

Mr Hockey said in the last Budget the government had promised to look at the bracket creep “coming into the tax system over the next few years”, but the delivery of the personal tax reductions depended on savings being made. He indicated the Senate was preventing the cuts by not passing Budget measures proposed last May.

“So again I call on the Senate to sensibly help us deal with the challenge of the legacy left by Labor which is just burgeoning expenditure,” he told reporters.

The Government has not explained how it will proceed with a 1.5 per cent tax cut for small business that the Prime Minister Abbott reaffirmed on Monday.

However, the government appears determined to levy 1.5 per cent of the taxable income of big business to pay for expanded child care services, arguing this would produce extra growth which would benefit companies.

Mr Hockey said business would not be paying more tax than it was today.

The brightest prospect for families is the government does not want to make up revenue shortfall by further attacks on household budgets and wage growth.

But Treasurer Hockey did not back off those existing proposals which would add to family expenses, such as health costs, warning: ”There is no easy path to surplus.”.

“Our structural savings remain,” he said.

“Our Budget will never get back to surplus, will never begin to start to pay down our debt, unless we actually start to deliver the changes in health, in education and in welfare that were in our last Budget.

Shadow finance minister Tony Burke said the government had a big task in restoring business confidence.

“What you’ve ended up with, is when you hit household budgets in the way they did in that last Budget you end up having an impact on confidence,” said Mr Burke.

“That’s why business confidence has been tanking, that’s why consumer confidence has been so far down. These are the issues that are entirely within the gift of this government.”

Originally published as Hockey warns more savings needed before bracket creep can be countered