Expect tax revenue hole of $12 billion: PM

TAX revenue will shrink by $12 billion by the end of June, according to new Treasury forecasts.

This means that across a four-year period, money collected by the government will be $12 billion less than forecast only seven months ago in the October budget update.

May 14's budget will include extensive spending cuts, which the government promises will not be so harsh that they will cost jobs and stunt economic growth, News Ltd reports.

This has raised speculation that welfare and tax concessions could be targeted.

Prime Minister Julia Gillard is set to reveal on Monday that $4.5 billion will be shaved off anticipated earnings by June, on top of the $7.5 billion loss Treasurer Wayne Swan last week said would disappear from anticipated tax revenue.

According to an extract of the prime minister's planned speech to an economic conference in Canberra on Monday, Ms Gillard will promise to respond to "the huge reductions in revenue growth over the next four years" caused partially by the strong Australian dollar.

Ms Gillard is expected to say the profit and subsequent tax revenue drop was because "the prices for what Australian companies sell overseas are lower, imports are cheaper, local competition is fierce".

"Those things add up to business making less profit than planned."

So far the prime minister has suggested that only plans for the National Disability Insurance Scheme and increased school funding will be protected.

"Our nation cannot afford to leave children behind or to leave our nation's future economy limping behind the pack, unable to attract the high-wage, high-skill jobs of the future," she will say.

Ms Gillard will be speaking as part of the Per Capita Reform Agenda Series.

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