No new taxes to pay for stimulus: Tanner

15 Feb 2009, 5:34 pm   -   Source: AAP
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The federal government will put the brakes on new spending in the budget. (AAP)

The federal government will put the brakes on new spending in the budget. (AAP)

Taxes won't be jacked up to pay for the government's $42 billion stimulus package - but the commonwealth will put the brakes on new spending in the budget.

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The federal government has ruled out tax hikes to fund measures aimed at pump-priming the economy while also dismissing speculation Prime Minister Kevin Rudd could call an early election to take advantage of the $42 billion economic stimulus package.

With $12.7 billion in cash handouts and billions more for a raft of nation building measures set to be doled out, it has been suggested an election could be called as early as September.

Parents, working Australians and farmers affected by the drought are set to receive up to $900 in one-off cash payments, beginning in March, while $28 billion in spending on schools and public housing will begin as early as next week.

But Finance Minister Lindsay Tanner has dismissed talk of an early election, saying the government is focused on guiding Australia through the global economic crisis.

"People in these circumstances expect us to govern, they expect us to deal with the crisis we've been presented with," he told Network Ten.

"We are literally one year and three months into our term, the last thing I want to talk about is elections.

"An election I don't think would create jobs, I don't think it will help us tackle the huge problems that we've got arising from the international recession.

"We are committed to doing what's needed to govern Australia, to protect jobs and to ensure that growth continues."

Labor has brought forward its national conference from January 2010 to July 31, fuelling speculation of an early poll, but the decision to change the date was made last year.

Mr Tanner was also adamant there would be no increases in taxes to pay for the government's stimulus package.

The opposition has criticised the plan, saying it will burden future generations of Australians with $200 billion worth of debt.

Mr Tanner said the government had a three-pronged plan to get the budget back into surplus, adding that tax hikes were not a part of that plan.

He said tax revenues would rise again automatically as growth returns.

"Without having to change any tax rates they will rise again automatically."

Mr Tanner said there would also be a two per cent cap on increases in spending until the budget returned to surplus.

"Any new spending proposals, once growth has resumed, will have to be offset by savings," he said.

However, there are concerns plans to adopt a paid maternity leave scheme, likely to cost at least $500 million, could be delayed as a result of the financial crisis and pressure on the budget.

Employment and Workplace Relations Minister Julia Gillard said the government was yet to make a decision on paid maternity leave, but said it remained in the mix as part of budget considerations.

The government was awaiting a final report from the Productivity Commission which it expects to have by the end of the month, Ms Gillard said.

"Government will then respond to that final report and paid maternity leave will be considered in the budget context," she told the Nine Network.

"Obviously, things that amount to expenditure, particularly ongoing expenditure for the nation, will be dealt with in the budget context."

The ranks of the unemployed are expected to swell by 300,000 as the global recession continues to weigh on the domestic economy.

Ms Gillard said the next Council of Australian Governments meeting would explore the possibility of adopting new measures to help and support the jobless.

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