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The endorsement by Senate of the budget for May/June provides me an opportunity to share some information with you regarding Australia's financial situation and outlook. Feel free to pose any questions you'd like in the comments below, and if you choose to vote, subscribe and shout this article the great gods of Martin Place will smile upon you.

Tax Reform

Some of you may have noticed that Australia's tax structure has changed considerably lately, most recently with a reduction in Import Tax for food and weapons from 15% to 1%, following a reduction in Income Tax from 10% to 1% a few weeks ago. This has not been an easy change and it is fair to say that there is not unanimous agreement but the changes were discussed vigorously at great length in Senate and a cautious forward plan has been accepted.

At first glance you might be thinking "What! Cut Import Tax, are you mad? We'll be flooded with imports from high productivity countries and local production will go down the tubes!" It's a reasonable line of thought, and an opinion that is held by some in Senate. Let me present the alternate view, adopted by a majority in Senate. The market today is dominated not by domestic consumption but by a mysterious phenomenon known as "the bot". Most goods are sold in a regular pattern to an unknown buyer at a set price (pre-tax) that changes every 1-2 weeks. Speculation is that over-production resulting from the ability to work as manager in a practically unlimited number of companies has led the game admin to develop a market bot that soaks up the excess market offers, injecting currency into the system and maintaining a low currency/gold exchange rate. This is speculation, and regardless of the existence of a bot or not the fact remains that all goods produced may be sold at a set price with VAT collected on each sale. The mechanism by which this happens is irrelevant to the discussion, only the knowledge that it happens. In this scenario it makes sense to encourage as much market activity as possible to maximise VAT collected from the mystery buyer, and use this revenue to support government budgets for everyday Australians. Reducing the Import Tax has the objective of encouraging importers to sell more on the Australian market boosting VAT revenue. Depending on the magnitude of this effect it has the potential to fully offset or even exceed the reduction in Import Tax income.


Who is the mystery buyer?

Despite the unknowns, Senate has agreed to trial this structure with the understanding that should the change appear to be detrimental they can easily be reversed, not so much a leap of faith as a toe in the water. Rest assured the effects are being monitored very closely. After our first day under the new Import Tax regime the results are encouraging, though it is difficult to isolate the effects of the tax change from the price deflation of two days ago and the additional resource bonus secured yesterday.

Budget

The budget has been approved by Senate, and for the first time to my knowledge includes a tax rebate for everyday Australians. For many months now successive governments have exercised good fiscal discipline, returning surpluses to our nation's reserves to save for the bad times. We now have sufficient reserves to draw upon in times of extreme threat of invasion, and to maintain a reasonable budget should the worst happen and we lose all regions for an extended period. Rather than continue to add to surpluses, the administration has proposed a balanced budget, with surplus tax revenue to be given back as a tax rebate. You'll hear more soon about applying for your tax rebate, but if you're not a member of the official Australian community forum, and/or not a member of the Aus Citizen membergroup you might want to sign up now.


MoF Paul J Keating demonstrating the size of the budget surplus

Another highlight of the budget is an increase in the number of MPPs to 25. At $10,000 per MPP these provide great value to ensure we can always fight, can gain more countries for mercenary medal, and can support and grow our friendships with allies across the world and gain their support in critical battles.

I hope you've found this informative, please stay tuned for updates on the tax rebate to be sure you can share in the rewards of prosperity.

Paul J Keating
Minister of Finance