Tougher workforce participation measures, skilled migrant numbers jump expected in the budget

Greater workforce participation requirements for the long-term unemployed, an increase in skilled migrant numbers and work-training programs to help service the booming resources sector are expected to play a key role in tonight’s Federal budget.

Under plans to kick in from the middle of next year, those who have been out of work for two years or more will be required to do work experience for two days a week for 11 months of the year, up from previous requirements of six out of 12 months. The work experience includes part-time work, training and work for the dole, and comes amid Government predictions the unemployment rate will fall to an impressive 4.5%, from 4.9%, as hundreds of thousands of jobs are created.

With businesses raising concerns about a skills shortage, the skilled migrant intake is expected to be increased by 6,000 to 16,000 in the 2011-12 financial year to assist with regional resources projects. Swan says while the Government’s priority is training Australians first, labour shortages will be filled by foreigners where appropriate.

The Government has already flagged the low income tax offset will be paid in instalments rather than annually, and the Entrepreneurs’ Tax Offset will be scrapped in favour of an across-the-board deduction for businesses of $5,000 for purchasing a car.

It has also detailed tighter social security conditions for teenage mothers, with payments to be terminated if they do not go back to school to finish year 12 when their child turns one. Families with teenage children, on the other hand, will receive increased benefits, designed to increase the number of children finishing school.

There are expectations the Government’s surplus will fall to the $50 billion mark this financial year, after the summer’s natural disasters, the high Australian dollar and weak consumer confidence cut into revenue. The deficit is expected to drop to $20 billion next year as the massive investment in the resources sector flows through the economy.

The Government this morning reaffirmed its commitment to bringing the budget back to surplus in 2012-13. It has also pledged to keep spending capped at 2% above inflation, and to slice the company tax rate by one percentage point to 29% – although that figure remains well above the Henry Review’s recommendations for a 25% rate.

Swan this morning said returning the budget to surplus would ease inflation fears, which were fanned by Reserve Bank comments last week that it expected underlying inflation to reach the 3% mark, which is at the higher end of the central bank’s target band.

Swan told reporters this morning that tonight’s budget will get Australia “back in the black”, with Australia tipped to become the first advanced economy in the world to reach a surplus. Tonight is Swan’s fourth budget as Labor Treasurer, and the first under Prime Minister Julia Gillard.

Other announcements include $2 billion for the mental health sector, which has expressed disappointment at Labor’s funding over the past few years.

Critics say despite the Government’s talk of a ‘tough’ budget, its knife-edge majority will stop it from making politically sensitive cuts and fully capitalising on the nation’s record terms of trade.

The Australian Retailers Association this morning warned the Government against introducing measures that would cut into consumers’ discretionary spending.

Parliament comes to an end at 2pm today, with the budget to be released at 7.30 this evening.