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Market fall puts $3b squeeze on Rudd budget

Date: October 4 2008
Phillip Coorey, Chief Political Correspondent

THE Federal Government is bracing for a loss of up to $3 billion in capital gains tax revenue as a result of the global financial crisis and the ravaging of the sharemarket.

Senior sources have told the Herald that the estimated loss will be one of the single greatest contributors to the overall decline in revenue this financial year being anticipated by the Government.

The $3 billion is in addition to the $3.8 billion decrease in capital gains tax for this financial year that was factored in the budget.

Since the budget was handed down on May 13, the global situation has worsened. The All Ordinaries Index has fallen by about 1200 points, wiping 20 per cent off the value of shares.

The Prime Minister, Kevin Rudd, warned at Thursday's meeting of premiers in Perth that the global meltdown would slow economic growth in Australia and lead to revenue loss.

There is no estimate yet for revenue loss for 2008-09, which in May was forecast to have a surplus of $21.7 billion. A revised surplus will be revealed late next month in the mid-year budget review.

Any new spending measures in the next budget are likely to be very limited, because the Government says it must maintain a large surplus to act as a buffer against the meltdown.

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