CANBERRA, Australia (AP) — Australia's government said Tuesday it plans to reduce its budget deficit by more than half in three years while maintaining momentum in a sluggish economy with personal and business tax cuts.
Treasurer Scott Morrison revealed that the deficit for the current fiscal year that ends on June 30 is expected reach 39.9 billion Australian dollars ($30.7 billion). That is AU$4.8 billion worse than was forecast a year ago as the Australian economy has been buffeted by China's slowing demand for iron ore and coal.
In its latest economic blueprint, the government plans to reduce Australia's deficit to AU$37.1 billion next year and to AU$15.4 billion by 2018-19.
The net debt, or accumulated budget deficits over time, will reach AU$346.8 billion when it peaks at 19.2 percent of GDP in 2017-18 before it is projected to start to decline.
The government also announced moderate personal tax breaks for Australians earning between AU$80,000 and AU$87,000 and a reduced tax rate for small and medium-sized businesses from July 1 as the economy transitions out of the mining boom that kept Australia out of recession during the 2008 global financial crisis.
The tax rate for businesses with less than AU$10 million turnover would be dropped one percentage point to 27.5 percent from July. The threshold would be progressively increased until all companies were taxed at 27.5 percent by 2023-24. Large companies are currently taxed at 30 percent, one of the highest rates among Organization of Economic Cooperation and Development countries. The government plans to reduce that to 25 percent over a decade.
"This is not a time to be splashing money around or increasing the tax burden on our economy or hardworking Australians and their families," Morrison told Parliament in delivering his first budget as treasurer.
"Such policies are not a plan for jobs and growth. They simply put our successful economic transition at risk," he added.
Business groups welcomed the tax cuts. But opposition treasury spokesman Chris Bowen said his Labor Party would oppose the cuts in Parliament.
Bowen told Australian Broadcasting Corp. the cuts over a decade were "not affordable for the nation and put more pressure on the budget."
The economic plan might never be realized with a federal election to be held on July 2. Prime Minister Malcolm Turnbull's conservative coalition will seek a second three-year-term.
Earlier Tuesday, Australia's central bank attempted to jolt the economy by reducing its benchmark interest rate by a quarter point to a new record low of 1.75 percent. The move was prompted by deflation in the March quarter, when prices fell 0.2 percent from the previous quarter.
Growth is forecast to remain steady at 2.5 percent in the next fiscal year and accelerate to 3 percent in 2017-18.
Unemployment is tipped to fall from 6.1 percent this year to 5.75 next year before plateauing at 5.5 percent in 2017-18.
The government also plans to increase the tax burden on the wealthiest Australians, multinational companies and cigarette smokers.
The government plans to introduce a new 40 percent penalty tax rate for multinational corporations that attempt to shift their Australian profits offshore to avoid paying tax.
A new Tax Avoidance Taskforce with 1,300 specialist staff within the Australian Taxation Office is expected to raise an additional AU$3.7 billion over four years from investigations into multinationals, businesses and wealthy individuals.
Annual hikes in tobacco tax from September next year are expected to raise AU$4.7 billion over three years.