The Abbott government will unveil a new $10 billion infrastructure package in its first budget offsetting the political pain of a harsh blueprint winding back social security, cutting family payments, introducing 'user pays' in health and education, and featuring increased taxes.
The massive new spending pledge will book-end around $10 billion to be skimmed directly from higher income earners over four years in what is being called a "special immediate measure" designed to make the rich share the burden of rapid deficit repayment.
Fairfax Media has learned the money for projects will include about $5 billion allocated to a fund that will be linked to Treasurer Joe Hockey's "asset recycling" plan, which encourages states to privatise their assets to access a 15 per cent bonus payment from Canberra.
Finance Minister Mathias Cormann asked voters to extend trust to the government despite broken promises on tax and paid parental leave.
However another minister, speaking on background, said he expected the budget would be "very tough" for the government because "the deficit levy will be one of the more popular things in the budget," hinting at even more pain across the board.
Releasing a glossy 64-page propaganda document entitled "Labor's Mess", Mr Cormann dodged questions on how many promises would be broken and on precisely how a proposed "deficit levy" being referred to within government as a "special immediate effort" would work.
However Fairfax Media has been told it will apply to incomes above $150,000 per annum as an additional tax on the top two marginal rates of income tax - currently 37 and 45 cents in the dollar. Each would be increased for a finite period with a view to raising $10 billion over four years or about $2.5 billion per year.
Mr Cormann said the government knew there was "a level of concern" about tax increases but asked for understanding from voters about the task ahead.
"We want to see lower taxes and in the budget we will be delivering the lowest possible taxes given the challenge that we are facing, given the budget situation that Labor has left behind," he said.
"We will be pursuing structural reforms and structural savings but we also recognise that there is a need for an immediate special effort in order to put ourselves into a stronger starting position ... and the only way you can ensure you do that is by also considering appropriately targeted measures through the tax system so that higher income earners participate in the additional effort required to put Australia back onto a stronger trajectory."
Another $5 billion will be spent on a range of major projects to turbo charge their roll out, with those projects that will receive extra money expected to include the East West link in Melbourne, which will receive additional federal funding over and above the $3 billion already committed to stages one and two of the road.
About another billion dollars will be committed to the $3.5 billion package already announced for roads and other infrastructure connected to the second Sydney airport at Badgerys Creek.
Other projects tipped for a funding boost include the South Road project in South Australia and the second range crossing in Toowoomba.
In an exclusive pre-budget interview with Fairfax Media, Deputy Prime Minister Warren Truss said the growth package will be a "very substantial infrastructure budget - in fact the biggest our nation has ever seen".
"It will not only commit a lot of federal funding to major projects, but lever funding from other tiers of government and the private sector to make a real difference to our nation,’’ he said.
Mr Truss said the government’s already-announced contributions to the East West link and WestConnex would help ensure the projects were economically viable.
“East West is a really big project and WestConnex is a really big project, you’re talking $12 to $14 billion … the government’s contribution will encourage the private sector and super funds to be involved.”
The new spending builds on the government's $35.5 billion plans, revealed in February, that adopted some of Labor’s plans while also re-prioritising some projects and adding in others that had been election promises.
Mr Truss declined to comment on the specifics of additional funding that would be allocated in the budget but said that “every community should see the benefits of this kind of infrastructure expenditure”.
The Deputy Prime Minister and Infrastructure Minister, who also served in the Howard cabinet and on its expenditure review committee, said the atmosphere in the lead up to the first Abbott budget had been “completely different”.
“Those were budgets with significant revenue, there was criticism that the surpluses were too high. This time it’s completely the opposite, the focus is very much on not just the debt and the current deficit, but the time bombs that are in the budget,’’ he said.
“Things like Gonski [education funding], where the expenditure profile under Labor was nothing much happened in the fifth year – well the fifth year is our fourth year, and we have to deal with it.”
The “massive ramp up” in spending on the National Disability Insurance Scheme and on defence spending had also presented significant fiscal challenges.
“This is a big budget and it's an important budget and we want people to see it as being difficult but fair, and that it does deliver a blueprint for the future - and that’s particularly true in my area of infrastructure.”
Separately, in a speech on the Coalition’s forthcoming budget to a Chifley Institute function in Melbourne on Thursday, former treasurer Wayne Swan will label Mr Abbott an excessively partisan “demolition man”.
“In government, they’re continuing to trash talk our economy, manufacture a false budget emergency and instil a general sense of public fear,’’ Mr Swan will say on Thursday.
“In their parallel universe, an economy 15 per cent larger than it was in 2007, unemployment with a 5 in front of it, a strong investment pipeline, low interest rates, low inflation and low public debt are all cause for alarm.”
“At the heart of the Abbott government’s economic agenda is a clear ideological intent to delegitimise progressive policies, particularly our world-beating stimulus package. That is, there is no role for government in economic management to secure balanced and equitable economic growth.”
Mr Swan also takes the government to task for launching royal commissions into the union movement and former Rudd government’s home insulation schemes, slashing the public service and appealing to the “right wing peanut gallery” with its proposed changes to the Racial Discrimination Act.