Australian PM flags tax cuts, infrastructure spend in federal budget

[CANBERRA] Australian Prime Minister Malcolm Turnbull on Monday promised tax cuts for lower income earners and flagged a multibillion dollar infrastructure spend, on the eve of a federal budget seen as the unofficial start of election campaigning.

Mr Turnbull's centre-right Liberal-National government is under pressure to deliver voter incentives in Tuesday's budget for the fiscal year ending June 2019, amid a banking sector scandal and falling support in the polls, while also fulfilling a promise to return finances to a surplus as soon as possible.

"We are doing everything we can to ease the burden of cost of living pressures on Australian families," Mr Turnbull told reporters in Sydney, as he unveiled part of a A$24.5 billion (S$24.6 billion), 10-year road and rail infrastructure package that is expected to be a cornerstone of the budget. "That is why we have got, you will see tomorrow, important measures relating to tax."

A recent improvement in the government's coffers due to a pick-up in revenue, particularly from company tax, has fuelled speculation it will unveil some big-ticket stimulus in a bid to win over voters.

But Treasurer Scott Morrison on Sunday warned voters not to expect "mammoth cuts" to taxes, while declining to comment on speculation the revenue increase would also allow the government to reveal a return to surplus a year earlier than forecast.

The government must hold a federal election by May 18, 2019, and Mr Turnbull has made clear it won't be called before the start of the new year.

Deloitte Access Economics has estimated that the corporate tax take has risen by A$36.2 billion from a year ago and individual income tax by A$10.6 billion.

In its mid-year review in December, the government forecast an A$10.2 billion surplus in 2020/21, along with an A$20.5 billion deficit for 2018/19.

Australia is continuing to rebalance itself away from a once-in-century mining investment boom that helped it become the only OECD country to escape recession during the global financial crisis.

Mr Morrison has already flagged a corporate tax cut to 25 per cent, from the current 30 per cent, despite failing to push the measure through the parliament, where the government has a majority of just one seat. He has argued the cut is needed to keep Australia competitive for investors, but the opposition Labor Party has said it's a meaningless "zombie cut" without parliamentary support.

BANKING SCANDAL

Mr Turnbull's government needs a positive response to its spending plan, after being buffeted by a dual citizenship crisis that almost cost it a parliamentary majority, a sex scandal that led to the resignation of the deputy prime minister and revelations of serious misconduct in Australia's banking sector, during an ongoing Royal Commission inquiry.

Mr Morrison has dismissed speculation that the commission has made the government's planned corporate tax cut a harder sell with the electorate, pointing to a banking levy recently imposed on the banks to raise A$16 billion over 10 years.

The government has already announced a raft of infrastructure projects across the country, including a A$5 billion rail link to Melbourne Airport, that it promises will create thousands of jobs.

Other budget sweeteners already announced include cutting the amount of excise tax paid by craft beer brewers, an A$140 million package to lure blockbuster film productions to Australia and plans to recover as much A$3.6 billion over the next four years in losses from illegal tobacco imports.

REUTERS