Treasurer Scott Morrison has given the clearest signal yet his election year budget will place spending restraint front and centre, with the prospect of "big bang" tax reform rapidly receding.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
The Turnbull government is whittling down the number of tax changes that could be adopted in the May 3 budget, with a rise in the GST already off the table and a plan to offer simplified tax returns - which would have raised as much as $6 billion in revenue to pay for tax cuts - now apparently off the table.
Tweaks to superannuation tax concessions are still expected to feature in the budget but major cuts to personal or company tax are now considered unlikely - leaving the government little room to move as it attempts to plot a course back to surplus in the medium term while simultaneously seeking to support economic growth.
And Mr Morrison, in an interview with the ABC's Radio National on Friday, confirmed his focus would be on expenditure restraint rather than revenue raising, setting up a clear contrast in economic management with Labor heading into an expected July 2 poll.
The Treasurer also brushed aside suggestions of a royal commission into the banking sector, and Labor calls to mandate the use of Australian steel in infrastructure projects after South Australian steel maker Arrium entered voluntary administration.
Mr Morrison labelled the proposal from Opposition Leader Bill Shorten a "knee-jerk reaction" and pointed out that an $80 million spend on steel for a rail project in Victoria had already been brought forward to support the steel maker.
"What you don't is you don't get involved in a knee-jerk reaction, the sort of thing that says 'lets tear up our trade agreements, lets tear up the jobs in the new economy', to go and play politics with an issue in South Australia," he said.
However Industry Minister Christopher Pyne, who is South Australian, told Nine on Friday that state and territory governments should be using federal taxpayers dollars to buy Australian steel where possible.
"State and territory governments using federal taxpayers dollars for construction and any federal government projects should use Australian steel," he said.
Responding to an analysis in The Australian that found seven spending programs, including the National Disability Insurance Scheme and higher education spending, would wipe out $400 billion from the budget over the next decade, Mr Morrison said he did not think Australia had blown its chance to live within its means.
"Projects like the NDIS, projects like ensuring that our defence force get the support they need, things like this put a lot of pressure on the budget and that means you have to get the discipline to ensure you control your expenditure going forward," he said.
His mid-year budget update late last year had, he said, demonstrated government spending was on a downward trajectory as a share of the economy and that would continue.
"The way you deal with this budget challenge is not to tax more and spend more, the way you deal with it is you get your expenditure under control and you create the room in the economy for private businesses to grow and employ people," he said.
"Our path sees expenditure as a share of the economy falling over the budget and the forward estimates, that will be the trajectory we seek to continue."
He described Labor claims that policies such as the NDIS and Gonski school funding were fully funded over 10 years were "fantasy".
On changes to the tax system, Mr Morrison said it was possible to change the tax mix without raising the overall tax burden.
He dodged questions about whether a proposal for simplified tax deductions had been dumped, and whether company tax cuts would be announced but deferred.
