Fed: ALP promises to restrict tax take if wins office

AAP General News (Australia)
04-28-2006
Fed: ALP promises to restrict tax take if wins office

By Shane Wright, Economics Correspondent

CANBERRA, April 28 AAP - A Labor federal government would restrict its ability to raise
income taxes while keeping the budget in surplus under a set of rules it has pledged to
uphold if it wins office next year.

Treasury spokesman Wayne Swan said Labor would not increase taxation as a share of
gross domestic product (GDP) if it wins power at the next federal election, effectively
guaranteeing tax cuts.

It also would keep the budget in surplus, on average, over the course of the economic
cycle, and Labor would look at an overhaul of spending programs in a bid to reduce government
initiatives.

The policy is part of a suite Labor has recently announced as it tries to rebuild its
economic credibility which took a battering under former leader Mark Latham during the
2004 election.

Mr Swan said Treasurer Peter Costello, who hands down his 11th budget on May 9, was
ignoring the problems facing Australia, and instead increasing his tax grab and spending
at the expense of ordinary people.

He said the budget should be used to build productivity, address Australia's current
account and foreign debt problems, and set the country up for the future.

The government had failed to capitalise on record prices for commodities in a mistake
that could have long-term repercussions for the economy.

"Essentially, we've had some of the best trading conditions in a generation," he told reporters.

"We've been playing on a batsman's wicket, but we've not been scoring many runs.

"And, because we've not been scoring many runs on such a favourable wicket, we absolutely
have to commit to a strong medium-term fiscal strategy, running surpluses over the cycle."

Mr Swan admitted that by not increasing taxation as a proportion of GDP (to be set
at the level determined in the usual pre-election budget statement), he was forcing financial
discipline on himself and the Labor Party.

He said budget surpluses would be used to build national infrastructure, rather than
pumped into the government's Future Fund which has been created to cover the cost of public
servants' superannuation.

The failure to boost productivity, and in turn build exports, was exposing Australia
to the long-term servicing of foreign debt that could become an intergenerational tax.

"Within that surplus there is ample room to attend to the priorities that we have outlined
here, including tax reform which will lift productivity through putting some real incentive
in the system which, at the moment, is a handbrake on productivity in this economy," he
said.

Mr Swan would not commit to never having the budget in deficit, saying no-one, including
Mr Costello, could make such a promise.

The budget was last in deficit in 2000-01.

He said Labor recognised that the current surplus - likely to come in around $14 billion
- was built on a temporary surge in commodities prices.

Ultimately, tough decisions would have to be made on the entire budget.

"We will get down to the hard and tough work of cutting spending, of finding the efficiencies,
and of re-arranging priorities," Mr Swan said.

"Now is the time, particularly in the next two budgets, to address the challenges as
we put in place the building blocks of future prosperity."

AAP sw/so/cdh/bwl

KEYWORD: BUDGET06 LABOR

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