Australia slaps major banks with higher taxes

CANBERRA: The Australian government pledged to deliver a small budget surplus in 2020/2021, slapping big banks with new taxes to end more than a decade of deficits that have threatened its prized triple-A credit rating.

The Liberal Party-led coalition conservative government also promised to fast-track major rail and road projects and delivered sweeteners for home buyers in an overheated property market in its annual budget yesterday.

Treasurer Scott Morrison said the country’s profitable banks, which had been under fire in recent months amid a series of misconduct scandals, would bear the brunt of a budget “re-set” as he abandoned “zombie savings”.

Those savings, including welfare reforms, had artificially reduced the red ink in the budget after they were blocked by opposition lawmakers in a hostile Senate where the government has a wafer-thin majority.

The backflip resulted in a A$29.4 billion (RM94 billion) deficit for 2017/2018 than the A$28.7 billion forecast in December. But the budget forecast a A$7.4 billion surplus in 2020/2021, an improvement on A$1.08 billion at the mid-year review.

Australia’s A$1.7 trillion economy has outperformed many of its peers since the global financial crisis, but it has struggled to manage the end of a mining investment boom that underpinned much of its wealth.

“We must live within our means and this is an honest budget,” said Morrison, adding that a new six-basis point levy on big banks’ liabilities, to kick in on July 1, would raise A$6.2 billion over the next four years.

Morrison described the measure, along with a A$8.2 billion income tax increase on workers, as “a Senate tax” to get the budget back into balance as demanded by ratings agencies or risk losing its triple-A credit rating.

Marie Diron, associate managing director of Moody’s Investors Service, said it assessed Australia’s fiscal strength as “very high, a key support to the government’s triple-A raiting and stable outlook” after the budget. Reuters