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Simkin budget summary -

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Simkin budget summary

Broadcast: 11/05/2010

Reporter: Mark Simkin

Mark Simkin provides a run down and analysis of Federal Budget 2010.

Transcript

MARK SIMKIN, CHIEF POLITICAL CORRESPONDENT: As promised, it's a relatively safe, no frills affair,
just a few sweeteners and no really nasty surprises to leave a bad taste in voters' mouths. The
return to surplus wins the headline; the deficit's expected to peak this financial year before
shrinking. It's forecast to disappear completely in three years' time - three years earlier than
expected.

WAYNE SWAN, TREASURER: The Budget delivers the fastest fiscal consolidation since the 1960s. It's a
very significant fiscal consolidation, as you can see in the chart. We are predicting a fiscal
consolidation, or projecting a fiscal consolidation which is much more rapid than that we saw
coming out of the 1980s and the 1990s recession.

MARK SIMKIN: $60 billion of that consolidation comes from a strengthening economy. Growth is
expected to cruise at 3.25 per cent next year before accelerating further. The growth spurt will
lower the unemployment rate from above five per cent to 4.75 per cent in the middle of 2012.
Treasury thinks inflation will fall to 2.5 per cent, despite the mining boom. And net debt's
expected to peak at $94 billion, a lot, lot lower than the $300 billion the Government feared
during the financial crisis.

The growth bounce isn't the only reason the Budget's heading back to black. The Government wants
some of the credit too, and there are around $20 billion worth of new taxes, although we already
knew about the biggest of them.

The resource tax brings in $12 billion over the forward estimates. The tobacco excise hike is worth
$5 billion. Changes to the Pharmaceutical Benefits Scheme will also nurse the budget back to
health. The Government's renegotiating its deals with drug companies, ensuring that when drug
prices fall, the Government contribution also drops. That adds up to more than $1 billion in
savings and should also lead to cheaper drugs, although there is a catch. The tax deduction for
hefty medical bills will be harder to claim. Currently, you need to spend more than $1,500 a year,
but the threshold will increase to $2,000.

Crackdowns on the cash economy and people allegedly rorting the disabilities pension will also
contribute, taking total savings to more than $30 billion over four years. And the Government's
achieved that by taxing big targets: big tobacco, big miners, big drug companies and welfare
cheats.

WAYNE SWAN: This Budget wasn't designed to shift opinion polls and I don't believe it will. Can we
just absolutely get over that one? So, what we've done is put in place a Budget for the times.

MARK SIMKIN: Less usual for an election Budget, there are relatively few voter-friendly handouts.
Government sources think the most popular initiative will be a tax cut to encourage savings. People
with money in banks, short-term deposits, bonds and the like will get a 50 per cent tax discount on
their interest, although it only applies to the first $1,000 worth of interest and won't kick in
for a year. Treasury expects nearly six million investors will benefit.

Paying tax will also get a little easier. In 2012, the old shoe box full of receipts could be
obsolete. Instead of tallying up work-related expenses, taxpayers will be able to claim a standard
$500 reduction, rising to $1,000 a year later. Treasury estimates six and a half million
Australians will find tax time simpler and cheaper. On average, people will be $191 better off.

The health budget's getting bigger: more than $2 billion of extra funding will be injected, taking
the total dose to well over $7 billion. The additional money will fund 23 new super clinics,
upgrade more than 400 existing clinics, train more nurses and deliver personal electronic medical
records. Urban GPs will be eligible for funding to help them employ nurses who can then give
vaccinations and provide other basic medical services. Half a billion dollars will be spent
improving access to afterhours medical care. Patients will be able to ring a 24-hour nurse hotline
and if necessary get a referral to an all-hours clinic.

More than half a billion dollars will be spent encouraging energy efficiency. The renewable energy
Future Fund will be used on wind, solar and biomass projects. Perhaps not coincidentally, the
Government will invest exactly the same amount it will save by putting the ETS on ice and that deep
freeze could be even longer than expected. The Budget papers stress the Government will only try to
legislate if there's a lot more international action.

There's more money for training and for trains and more than $1 billion to improve border
protection.

Ultimately, though, this Budget's about political protection. It's not a typical election year
spend-a-thon. We've already had the stimulus and almost all of these measures won't kick in until
after the poll, including the return to surplus. Instead, it's all about economic management and
deflecting and deflating Opposition attacks, particularly on debt and deficit.