Chinese demand for raw materials such as iron ore and coal helped keep Australia out of recession during the global economic crisis. But the mining boom is expected to peak this calendar year and businesses outside the resource sector are not growing fast enough to make up for the miners' expected retreat.
The government introduced a 30 percent tax on iron ore and coal miners' profits above a set threshold in the current fiscal year which was supposed to raise AU$3 billion in its first year.
The latest estimate is that that tax will raise only AU$200 million in the current fiscal year due to a sharp fall in commodity prices and AU$700 million next year.
The government also introduced in the current fiscal year a carbon tax of AU$23 for every metric ton of carbon gases emitted by Australia's worst industrial polluters. Most households were compensated for the higher living costs as a result of the tax with tax breaks and increased welfare.The latest budget scraps plans for more tax breaks promised in 2015-16 when the carbon tax is scheduled to be replaced by a carbon permit trading scheme. The Australian scheme will be linked to the European emissions trading scheme which has experienced declining carbon prices due to the depressed economy. While last year the carbon price was expected to be AU$29 a metric ton in 2015-16, the latest budget predicts AU$12 a metric ton which won't add to living costs. Australia's central bank last week cut its key interest rate by a quarter percentage point to a record low 2.75 percent in an effort to boost economic growth and to drive down the currency that has failed to track lower with commodity prices. International investor interest in Australian bonds as a safe haven in global market turmoil has helped keep the currency buoyant.