Tunbull government’s first Federal Budget to reportedly include tobacco excise rise
AS the Turnbull government faces the risk of Australia losing its AAA credit rating, an increase in tobacco excise will reportedly be part of this year’s Federal Budget.
AS the Turnbull government faces the risk of Australia losing its AAA credit rating, an increase in tobacco excise will reportedly be part of this year’s Federal Budget.
Scott Morrison’s joy of an unexpected drop in the jobless rate will have been quickly dashed by a stark warning that Australia’s triple-A credit rating could be at risk after his first budget.
One of the world’s major credit rating agencies is not happy with what it is hearing from the treasurer just weeks out from the May 3 budget.
Moody’s Investors Service notes the treasurer has excluded revenue-raising measures when talking about his budget aims, and given the government’s previous difficulties in reducing welfare benefits, it believes actual spending cuts may be modest.
“Without such measures, limited spending cuts are unlikely to meaningfully advance the government’s aim of balanced finances by the fiscal year ending June 2021 and government debt will likely continue to climb, a credit negative for Australia,” Moody’s says. A credit downgrade would hit confidence while lifting borrowing costs abroad for the government and big business, which, in turn, would be passed on to consumers.
According to Fairfax Media, sources said that an increase in the tobacco excise to raise additional tax revenue will be included in the Federal Budget.
MORE: NAB also warns of Australia losing its AAA credit rating
The reported focus on tobacco excise comes after Labor announced it would increase tobacco excise if it wins the next election.
When asked about the plan to target tobacco excise on ABC 730, Finance Minister Mathias Cormann said he was not going to comment on measures that may or may not be in the Budget on May 3.
When asked about Moody’s predictions for the Australian economy, debt and credit rating, he said the Turnbull government still has a better vision than Labor.
“Things are better than they would have been if Labor’s policy settings remained in place. We are now in a stronger position than we would have been if we had not made many of the changes that we’ve made,” he said.
“Furthermore, Bill Shorten already has made more than $50 billion of unfunded spending promises over the current forward estimates, so the Budget right now would be $50 million worse off if Bill Shorten was prime minister today than under the Coalition. We have a clear plan - a plan for stronger growth and more jobs.”
Shadow treasurer Chris Bowen said Moody’s warning was a wake-up call for Mr Morrison.
“Stop playing games, start governing. We’ve been saying for a long time now that tough decisions are necessary on revenue and spending,” he told reporters.
But Mr Morrison said the best way to protect the rating was to deliver a strong budget that backed growth and jobs in the economy.
“The government doesn’t believe that what has been put out today is a licence to tax Australians more,” the treasurer told reporters in his southern Sydney electorate.
But it was a reminder of the need to continue to consolidate the budget, reduce the deficit and over time that would reduce the debt.
“Our plan is to see revenue rises through growth and ensuring a better targeted tax system,” Mr Morrison said.
There was some good news on employment front with the jobless rate unexpectedly dropping to 5.7 per cent, its lowest level since the Coalition came to power in September 2013.
Economists had predicted a rise to 5.9 per cent from 5.8 per cent.
The total number of people in employment also rose by a larger-than-expected 26,100.
“So when a Coalition government is able to implement its economic agenda, you can clearly see it’s one of job growth and job creation,” Employment Minister Michaelia Cash said.
Commonwealth Securities economist Savanth Sebastian said the drop in the jobless rate would provide a big boost to confidence among consumers.
“As we saw over the latter part of 2015, job security plays a big part in household consumption,” he said.
Consumer confidence has been under a cloud in recent weeks ahead of the budget and a possible election on July 2.
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