Prime Minister Tony Abbott is a man with a plan. But do you like what's in store? Source: News Corp Australia
MIDDLE-income families will be denied rises in tax concessions compensating for inflation in the Budget two weeks from Tuesday which Prime Minister Tony Abbott tonight said would be a first installment of spending cuts.
But the Prime Minister has pledged these and other measures would clear the way for income tax cuts in five years.
The age pension will not be lowered now but Mr Abbott will seek a mandate for a reduction in the pension's indexation and tougher means testing at the 2016 election.
And the Budget will contain programs to get the disabled, the elderly and women with young children off welfare and into the workforce.
The Prime Minister called the Budget politically risky. However, the pain would be short term and necessary to hack back debt of potentially $667 billion Mr Abbott said had been left by Labor governments.
He outlined some of the Budget's measures in a Sydney speech designed to complement the warnings about runaway spending issued by Treasurer Joe Hockey last week.
Walking the talk in a fortnight's time. Joe Hockey has flagged mega austerity. Source: News Corp Australia
Mr Abbott said the objective was to reduce debt and return the Budget to surplus over at least five years but would not put a target date for balanced finances, saying it would be achieved within a decade.
"This Budget will not change everything with one stroke," Mr Abbott said.
"It won't offer a spurious guarantee of a surplus by a particular date. This Budget will by no means be the only instalment in the long-term restructuring needed to restore our economic health."
The Prime Minister pointed to changes in welfare for families, which mostly is the Family Tax Benefit A and B. Indexation of these means tested concessions was frozen under Labor but the cost of living adjustments were set to return this year.
Mr Abbott's comments indicate that won't happen.
"But the best way to help families on $100,000 a year is long-term tax relief and more business and job opportunities, not social security,'' he said in the speech.
"The change in this Budget will make personal tax cuts more likely in four or fine years' time.
"Come Budget night, I suspect that there won't be many without a potential grumble — but involving everyone in reaping Labor's spending binge is the only way to be fair.
"The Budget pain will be temporary but the economic improvement will be permanent."
Short-term pain for long-term gain, Mr Abbott says. Source: News Corp Australia
Mr Abbott said changes to the age pension was essential and unavoidable because it was rapidly becoming too expensive. But he said the Government would keep his promise not to touch the pension rate — at least in this term of office.
"To keep our commitments, there will be no changes to the pension during this term of Parliament but there should be change to indexation arrangements and eligibility thresholds in three years time," he said.
"There are other social security benefits where indexation arrangements and eligibility thresholds could be adjusted."
Mr Abbott made no reference to speculation a one-off levy could be imposed on wage earners to cover short-term expenses.
The Government has been firmly told by business it does not want a temporary levy to cover immediate bills which the Business Council of Australia fears could be a bid to "let governments off the hook on the structural steps needed to fix the budget properly".
"Temporary tax increases are no substitute for the reforms that are needed to bring spending back under control and put the budget onto a more sustainable footing," said BCA chief executive Jennifer Westacott.
More is needed that temporary tax incentives, says business council chief executive Jennifer Westacott. Source: News Limited
Ms Westacott said the Budget's focus should be elimination of waste and inefficiency, and better targeted government programs and payments.
"Australia needs comprehensive tax reform implemented over the medium term, rather than ad hoc levies in this budget," she said.
"Raising Australia's already high dependence on personal income tax will place an increased burden on workers and could weigh down an already sluggish economy. If we are serious about lifting our productivity and competitiveness, we should be lowering taxes, not increasing them."
Opposition Leader Bill Shorten accused the government of scaring pensioners with talk of cuts and wage earners with speculation about the deficit levy.
"Here's a couple of ideas for Joe Hockey and Tony Abbott — don't break your promises," Mr Shorten told reporters.
"Here's a couple of ideas for Tony Abbott and Joe Hockey — don't say nine times in a 32 day election period when you're chasing people's votes that they won't touch pensions, and then as soon as you get elected have twisted priorities and broken promises and introduce a new deceit tax.
"No bigger broken promise than saying to pensioners before the election that your pensions are safe, then after the election starting to scare Australia's pensioners by talking about messing around with aspects of the pension."
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