22 Oct 2012

Swan announces cuts to protect lower surplus

3:15 pm on 22 October 2012

The Australian government is planning more than $A16 billion in savings over four years in order to deliver a forecast budget surplus.

In its mid-year budget update on Monday, the government announced a range of cuts and a lower budget surplus, the ABC reports.

The government is reducing the private health insurance rebate by limiting increases to inflation that will save $710 million over four years.

Treasurer Wayne Swan says the rebate cost the government about $A5 billion a year, which is unsustainable.

Labor is also cutting the baby bonus payments. Parents will still get $A5000 for their first child, but it will be slashed to $A3000 for every child after that, saving the government $A461 million over three years.

The government is also making further cuts to the public service and increasing fines. It says it will raise $8.3 billion over four years by making large companies pay their tax instalments monthly, instead of quarterly.

In a statement, Mr Swan said the savings measures would help return the budget to surplus, giving the Reserve Bank more room to cut interest rates.

"These savings strike the right balance, minimising any impact on the economy and on the community's most vulnerable, while still maintaining strong public finances."

The Greens and the Business Council of Australia say the federal government should consider waiting until 2013 to bring the budget back to surplus.