PROMISED tax cuts could be brought forward a year as the Rudd Government considers options for a second emergency package to counter the worsening global economy.
Wayne Swan said yesterday the Government was determined to do all it could to strengthen the economy in the face of the international crisis.
"We are certainly all in this together - Australian families, businesses large and small and the Rudd Government - and we stand ready to take more decisive action should the international situation deteriorate further," the Treasurer said.
The Government is in the process of spending $10.4 billion, with payments to pensioners, families and carers, and increasing the first-home buyers grant.
However, it is coming under pressure from the International Monetary Fund to do more, and both the domestic and international oulooks have darkened since the first stimulus package was unveiled in October.
The recession in the US is becoming increasingly severe, with 550,000 people losing their jobs last month, pushing the unemployment rate to a 16-year high of 7.2 per cent.
The employment outlook in Australia is also getting worse. The ANZ's monthly survey of job advertisements shows a 9.7 per cent fall in December alone, with the number of jobs on offer falling by 27.2 per cent since July.
The ANZ's head of Australian economics, Warren Hogan, said the pace of decline was consistent with a recession over the next nine months and suggested rising unemployment that would last for several years.
He said the collapse of job advertisements meant the Government's budget position was weakening faster than it forecast in its budget update last November, which tipped the unemployment rate to rise to 5 per cent.
"We expect to see an upward revision to the official unemployment forecast in the May budget resulting in a further deterioration in the Government's financial position," he said.
A tax cut of $3.4 billion is locked in from July 1 and it is possible the Government may bring forward a further $4.5 billion in tax cuts presently planned for the middle of next year.
The tax cuts planned both this year and next involve lifting the threshold at which the 30c-in-the-dollar tax rate cuts in, from $34,000 to $37,000, and lifting the threshold for the low-income tax offset from $14,000 to $16,000. People earning less than this will pay no tax, while people earning up to $67,500 will have some entitlement to the low-income tax offset.
Mr Swan's office would not comment specifically on the IMF's suggestions for increased budget stimulus or on the options it was considering.
Economists believe the budget is already on course to run a deficit next year, with estimates ranging from $5billion to $25 billion. The Government's last budget update predicted a small surplus.
Macquarie Bank senior economist Brian Redican said there was a strong case for the Government to boost spending, even if it pushed the deficit to 2 per cent of GDP (or $25 billion).
"There is scope to bring forward the tax cuts due for 2010-11, and the politicians will be thinking very hard about what they could do to lift the housing construction market," he said.
He said one-off payments to the unemployed would also be an option for the Government, as these would be rapidly reinjected back into the economy with additional spending.
The IMF has set a global goal for budget stimulus packages to total 2 per cent of global GDP, but it wants nations with strong budgetary positions, such as Australia, to do more. ........"
http://www.theaustralian.news.com.au/story/0,25197,24904684-601,00.html
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