13 May 2008
TREASURER Wayne Swan brings down Labor's first budget tonight against the background of the biggest drop in four years in the number of loans for new housing.
Both the value and quantity of loans for housing fell in March as official and bank-led interest rate rises continued to slow the housing market.The number of housing loans fell 6.1% to 59,371 - a much worse decline than expected - while loans for new dwellings dropped by a massive 11.5%, its biggest fall in four years, the Bureau of Statistics reports.As the housing figures provided fresh evidence that the economy is losing momentum, a National Australia Bank survey showed business confidence was also continuing to plummet, to a 61/2-year low.The survey warned that wage costs may have started to rise because of the tight labour market - a danger to the battle against inflation.The Treasurer again warned that the budget revenue outlook was not as good as some economists are suggesting. "The previous government just relied upon endless increases in taxation revenue to fund increasing spending. We haven't got that luxury," Mr Swan said.Tonight's budget will be the first instalment in an ambitious Labor economic and social agenda, redistributing benefits and tax breaks from better off people and setting up a massive wealth fund, the Building Australia Fund, to tackle Australia's infrastructure crisis. Prime Minister Kevin Rudd told the Labor caucus yesterday this would be a "good Labor budget". Means testing and tax rises will hit the rich, but battlers - now called "working families" - will be protected as the Government cracks down on inflation in a bid to avoid fresh interest rate rises. Election promises, most notably the $31 billion tax cuts package, will be delivered. The surplus for 2008-09 will exceed $17 billion and could be more than $20 billion. Around 650 cuts and redirections of spending will yield billions in savings. More money for hospitals and schools, a boost to the child-care rebate, and spending on environmental initiatives will reflect Labor priorities, while Howard government programs such as the regional partnerships program will be slashed, dismantled or recast. The Age has learned that Australia's humanitarian immigration intake will be increased by 500, with more focus on refugees from Iraq and Burma.The budget's economic outlook will be uncertain, with growth slowing, inflation still high in the short term, and unemployment likely to rise. Australia will enjoy the best and worst of times from overseas - high commodity prices but the effects of international financial turbulence.The Government's slug-the-rich approach received some buttressing from a Newspoll yesterday, which found that about two-thirds of voters supported means-testing the baby bonus and Family Tax Benefit B for stay-at-home mothers. Mr Swan said the budget would tackle inflation by making savings "but importantly put in place the necessary investments for the future...to expand the supply capacity of the economy which has also been putting upward pressure on interest rates."He was confident Australians would understand the need for tough decisions "because sometimes good housekeeping does require tough decisions". The row over the Government's decision to increase substantially the income cut-in levels for the Medicare surcharge sharpened yesterday. The Australian Health Insurance Association accused the Prime Minister of using "weasel words" to break what it understood as an election promise, and Opposition health spokesman Joe Hockey warned the decision would be a "catastrophe" for private health insurance and public hospitals. But Mr Swan said: "Up to 2 million people have been caught in a tax trap. We have removed that tax trap."The Bureau of Statistics' March figures show housing loans for first home buyers softened to 16.4% of owner-occupied approvals (down from 18.6% in October), as they became unable to afford higher interest rates.The total value of housing finance fell by 5.3% to $20.2 billion, while investment loans dipped 7.2%. Economists say successive interest rate rises from both the Reserve Bank and retail banks have discouraged buyers and investors.