Australia cuts income tax


  • Business
  • Wednesday, 11 May 2005

CANBERRA: Australia's conservative government unveiled surprise tax cuts and tighter rules for welfare yesterday in a post-election budget delivered against a backdrop of leadership turmoil within the ruling coalition. 

Treasurer Peter Costello announced A$22bil worth of income tax cuts over four years, the abolition of a 12.5% pension surcharge for the rich, and a A$3.6bil package to wean people off welfare and back into work. 

Costello said his 10th budget would address problems caused by Australia's ageing population, with the number of Australians aged over 65 set to double to one in four by 2045, while those of working age would remain stable. 

“Behind this budget is the great demographic date with destiny,” he told reporters. 

The budget also included details of a government investment fund, to be set up with an initial A$16bil, to cover public service pension payments – the government's biggest unfunded liability – which are forecast to grow to A$140bil by 2020. 

Economists said the giveaway reflected the strength of the underlying economy, but financial markets were unmoved with the Australian dollar holding 77.40 US cents while bank bill futures were steady. 

Opposition parties condemned the budget and said it did not do enough for low and middle-income earners. 

“It's a great gift to the already rich and the greedy. This makes Australia a less fair country,” Greens leader Bob Brown told reporters, noting that the biggest tax cuts went to high-income earners. 

The centre-left Labour opposition said the budget was economically irresponsible and could put pressure on inflation. 

“The problem with this budget is it serves the top table first – John Howard has no room at the table for Howard's battlers,” Labour's treasury spokesman Wayne Swan said. 

The budget was the first since Prime Minister John Howard was returned for a fourth term with an increased majority at last October's election. – Reuters  

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