Tony Abbott offers “Real Solutions”

Tony Abbott promised tonight that a Coalition government would help families by keeping the present tax thresholds and maintaining pensions.

But the Opposition Leader did not promise to restore the Howard government’s baby bonus, which the Gillard government abolished, in Tuesday night’s budget.

However Mr Abbott did declare that he would scrap both the carbon tax and the mining tax, if he becomes Prime Minister in the Federal elections on September 14.

He was delivering his Budget reply speech in Federal Parliament.

But that speech contained none of the detailed costings, which both the Prime Minister, Julia Gillard and the Treasurer, Wayne Swan had demanded earlier in the day.

Mr Abbott said a Coalition government would cut 12,000 public service jobs.

But he promised that would be done by “natural attrition.”

“Should the Coalition win the election, there will be no nasty surprises and there’ll be no lame excuses,” Mr Abbott said.

He said the Coalition’s Real Solutions plan had two objectives.

“…first, to take the budget pressure off Australian households.

“ and second, to strengthen our economy so that, over time, there’s more to go round for everyone.”

“ Only by delivering a strong economy can government deliver a sustainable National Disability Insurance Scheme and better schools,” Mr Abbott said.

“ A Coalition government will keep the current income tax thresholds and the current pension and benefit fortnightly rates while scrapping the carbon tax.

“The carbon tax will go but no one’s personal tax will go up and no one’s fortnightly pension or benefit will go down.”

“So with a change of government, your weekly and fortnightly budgets will be under less pressure as electricity prices fall and gas prices fall and the carbon tax no longer cascades through our economy,” the Opposition Leader said.

But he did announce some tough steps.

“ Tonight, I confirm that we won’t continue the twice a year supplementary allowance to people on benefits because it’s supposed to be funded from the mining tax and the mining tax isn’t raising any revenue,” Mr Abbott said.

“As well, we won’t continue the low income superannuation contribution because that’s also funded from the tax that isn’t raising any revenue.

“I announce that we will delay by two years the ramp up in compulsory superannuation because this money comes largely from business – not from government – and our economy needs encouragement as mining investment starts to wane and new sources of growth are needed.

“These measures alone will produce nearly $5 billion a year in savings which is more than enough for tax cuts without a carbon tax.”

However he did promise a cut in company tax and committed a Coalition government to tax reform.

He said there would be “… modest company tax cut as soon as it’s affordable.”

But “it doesn’t end there,” Mr Abbott said.

“Within two years, an incoming Coalition government will consult with the community to produce a comprehensive white paper on tax reform.”

Apologies

Apologies for our late publication today.

Yes. Your correspondent was exhausted, after covering the budget last night.

But the delay was actually due to technical issues.

Medicare levy bills to go into Parliament this week

The Federal government will move in Parliament on Wednesday to raise the Medicare Levy from 1.5 to 2 per cent of taxable income.

If it is successful, the new rate would apply from July 1 next year.

All of the extra money would go towards funding the government’s national disability insurance scheme, which is now called DisabilityCare.

The Federal Treasurer, Wayne Swan, said: “ Draft legislation has today been released so that it can be considered by Members and Senators ahead of its introduction so as to facilitate prompt passage through the Parliament.”

This is expected to pass both houses of parliament, even though the Opposition Leader, Tony Abbott, has said he has reservations about levy finance.

Mr Swan said: “DisabilityCare Australia will provide peace of mind to all Australians that if they or a loved one acquire or are born with a disability, they will get the support they need.

“It is the most fundamental social policy reform since the introduction of Medicare.”

Rules set for public investment in green technologies

The Federal government has set broad rules for taxpayer investment in clean energy projects through the Clean Energy Finance Corporation.

The Federal Treasurer, Wayne Swan, the Climate Change Minister, Greg Combet and Finance Minister, Penny Wong, set out a “mandate” for these investments, in a statement issued today.

However the Coalition attacked the plan and said it would abolish the Corporation, if it won government on September 14.

The Shadow Finance Minister, Andrew Robb, said this: “… is yet another example of poor public policy from this government which has the very real potential of resulting in the waste of billions of taxpayers’ dollars….”

“This is a very desperate government which will use any means to throw money at preferred constituencies before the election.

“It will be all borrowed money and will add to Labor’s already record net debt levels of $165 billion,” Mr Robb said.

However the three ministers said the Corporation would manage the proposed investments independently, within the terms of the mandate.

They said the Corporation would have a $10 billion fund dedicated to investing in renewable energy, energy efficiency and clean technology.

The three ministers said the Corporation would have a crucial role in driving such investments.

It would encourage private investment and help to overcome capital market barriers to commercialising cleaner energy technologies.

The ministers said the mandate reinforces the government’s expectation that the Corporation will apply commercial rigour to its investment decisions.

It sets the five year government bond rate as the long term target for returns on the investments the Corporation supports.

Go to mandate

Manufacturing strengthens:a little

Australia’s manufacturing activity improved in the first three months of this year, according to the National Australia Bank’s manufacturing index.

However that improvement, brought on by stronger business confidence, merely restored activity to “neutral” levels.

The bank said: “The index implies no growth in quarterly manufacturing activity.”

It said the index had edged higher in the March quarter, from -0.3 points in the final three months of last year.

“This …..implies that there was no growth in quarterly manufacturing activity in Q1,” the bank added.

“ Business Confidence in the Manufacturing sector remained negative in Q1 2013 – but less negative than the past few quarters,” it said.

The biggest increases in confidence were seen in the Chemicals, Textiles, Clothing & Footwear sectors and the Machinery & Equipment sector.

The Age of Austerity fades

We are swiping our credit cards in the nation’s shops, once again.

The Australian Bureau of Statistics reports that our use of “revolving credit” – which includes those cards – rose by 5.2 per cent in February, on seasonally adjusted figures.

This is an important observation as, till then, Australians appeared to be saving more and spending less.

The Bureau’s report follows a survey by Dun and Bradstreet which shows that Australians are now more likely to use their credit cards, to buy items they could not otherwise afford, than they have been for quite some time. (see earlier story)

Business conditions slump, but confidence – in most areas – still resilient

A new survey shows that although business conditions in Australia hit their weakest level in almost four years last month confidence – outside mining – remained steady.

However, the latest monthly business survey, conducted by the National Australia Bank, also revealed that confidence among miners, has deteriorated sharply, falling to its weakest level in four years, last month.

This this was offset by stronger confidence in “interest sensitive sectors.”

The survey also confirmed that the surges seen earlier this year in the retail and manufacturing sectors unwound in March.

This had also been indicated in other recent studies.

The NAB’s economists said it appears that the lower interest rates that now apply in Australia need more time to fully work through economy.

However they also said that further stimulus might be needed, through fresh rate cuts.

Even so, they said that business seems “unfazed” by either recent events in Cyprus or “political leadership scuffles at home.”

However Australia’s forward indicators are still poor.

Specifically they said that the present slump in activity reflects a weakening in trading and employment conditions.

“…profitability was unchanged at a subdued level,” they added.

“Forward orders had improved, but they remained weak, with the outlook for near-term demand not helped by still low levels of capacity utilisation and capital expenditure.

Service sector stirs

Trade in Australia’s service sector is picking up.

The Performance of Services Index, produced by the Australian Industry Group and the Commonwealth Bank rose 1.1 points to 49.6 in March.

Readings above 50 points indicate that trade, in the sector, is in positive territory.

Sales and employment both improved in March.

The accommodation and restaurant sectors produced the best results last month.

However uncertainties associated with the September 14 elections are still worrying service sector providers.

The Australian Industry Group Chief Executive, Innes Willox, welcomed the positive trend.

He said sub-sectors closely linked to household consumption are picking up while other sectors continue to struggle.

Commonwealth Bank Senior Economist, John Peters, said: “It is edifying to see the headline Australian PSI moving to just a shade under the key 50 mark.

“Historically low interest rates, combined with ongoing positive news about the global growth outlook, especially in emerging Asia and the US, and rebounding asset prices (i.e. equities) in early 2013 should help bolster consumer and business sentiment and activity over 2013,” Mr Peters said.