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Budget 2016

May 2, 2016


To paraphrase Annabel Crabb, ’budgets are a bit like cheese’ (or wine?) in that they mature over time and it can take a little while before they reveal all of their little secrets. For example last year’s budget left me feeling that Abbott and Hockey had learnt their lesson after Budget2014 was so poorly received. However, over the following days and as the deeper analysis came out, that feeling soured.

My first impressions of this year’s budget – the first for Turnbull/Morrison – are summed up well by Nick Xenophon who labelled it a ‘treading water budget’.  With a looming election and the political and fiscal mistakes of Abbott/Hockey they’re stuck in a bit of a pickle.

Howard and Costello used the huge bonus income from the mining boom to buy our votes and convince us that “surplus good, deficit bad” which isn’t strictly true. Rather than following in the footsteps of Hawke and Keating by trusting the electorate and teaching us about the economy, Rudd, Gillard and especially Wayne Swan continued to define good economic management as being in surplus.

When Swan promised a surplus each year after the GFC and it inched further and further away like a ball on a lake, he failed to explain why a surplus wasn’t the highest priority at the time and the Abbott opposition took him to task over it – quite rightly, in political terms.

Then, when Abbott and Hockey came to power, they made the same mistake. In fairness to Joe Hockey, he seemed to try and change the surplus-at-all-cost rhetoric in 2015, but Abbott slapped him down. Now we have Turnbull/Morrison finally trying to change the debate, but they’re torn between the fiscal realities, wanting to win an election and their party’s ‘small government’ ideology.

As we know, Abbott and Hockey screamed about the ‘need’ for a surplus long after they were blue in the face. They also advocated for small government, lower spending as a proportion of GDP and deficit reduction/reaching surplus.

The trouble with all of that is ‘smaller government’ under Abbott turned out to mean cuts to programs and services that most of us agree make Australia a great place to be – like Medicare and the Pharmaceutical Benefits Scheme (PBS).

Small government also meant forcing young unemployed people to survive on $0 for six months of the year until they were 30, at a time when jobs were getting harder to find and cutting approximately $80bn worth of funding to the states for hospitals and schools. All of these measures – and more – were to impact the less well-off more than the comparatively rich. Thankfully, the Senate voted most of them down.

Lower spending as a proportion of GDP didn't really happen – partially due to falling revenue from mining companies and partially because the Abbott Government increased spending in the 2015 budget in an effort to make us forget the huge cuts (outlined above) proposed in the 2014 budget. These same factors have resulted in the deficit doubling and the expected return to surplus (or at least a balanced budget) blowing out to the year 2022 on current – in some ways optimistic – projections.

On budget day stakeholders such as politicians (from all sides), journalists and lobby groups attend the Budget Lock-Up during which they’re locked in a room all day with Treasury officials who take them through the detail of the budget papers.

Obviously those in the Business Council of Australia will be asking different questions to the representatives from the Winegrowers Association (for example) and once they’re out of the lockup at around 7:30 in the evening, the media will show more interest in some groups’ impressions than others. This means that – as mentioned above – it can take a while for some measures to come to light. Below is a list of measures I've come across whilst trawling the internet and social media since the budget was handed down a few hours ago.

Business Tax Cuts:
The Coalition is proposing to lower the small business tax rate to 27.5%. I don’t think anyone will be particularly unhappy about this. But, it gets a bit weird – Instead of a “small business” being one that has an annual turnover of $2m (their current tax rate is 28.5%), the definition will change to a business with an annual turnover of $5m, then (over a few years) a turnover of $10m, eventually the tax cut will apply to a business with an annual turnover of $1bn. I assume by then it’ll no longer be called a ‘small business’ tax cut.

The argument is that by reducing the amount of money businesses pay in tax, they’ll be able to afford to employ more workers. I’m yet to find any modelling confirming that this is the case and the ABC’s Stephen Long believes it’s all a con anyway because it will take so long for any real effect to occur.

Income Tax Cuts:
A while ago Scott Morrison was talking about the problem of Bracket Creep and seemed to be saying he’d do something about it. In this budget, he has given a little bit of relief to those earning over $80,000 per year - it equates to around $6 per week for those affected. Apparently, 76% of people will not be assisted by this measure – including most people in Murray.

Meanwhile, the government has decided not to extend the “deficit levy” that was put on high income earners for a fixed period of 3 years. This effectively gives those who don’t really need it an extra $1000 per year in their own pocket.

Internships for the Youth Unemployed:
Rather than putting them out on the streets, Morrison wants to create a work for the dole scheme that leads to real jobs. Essentially, there would be financial benefits given to those who choose to work for the dole. Further financial incentives will be given to businesses who take these young people on and give them internships and jobs. I want to see the detail, but this measure is quite exciting given the high youth unemployment rate and the difficulty some businesses have in finding reliable staff.

Scott Morrison ridiculed Labor’s planned cuts to superannuation tax concessions to higher income earners but has now adopted a similar policy.

He has also put forward plans to give small business owners - including tradies - tax breaks if they contribute to their own superannuation and for people who make 'top up' payments to their spouse's super when they are not working due to carer responsibilities.

Crowd Sourced Equity Funding:
This measure was mentioned, but I haven't been able to find any detail as yet - I'm hopeful it'll assist entrepreneurs to start businesses and farmers to purchase land as a collective (as discussed in my Agriculture policy). 

Joe Hockey tried to implement cuts to Medicare bulk billing, including for pathology - this budget hasn't amended this.

Apparently the National Gallery of Australia is set to lose 8.5% of their staff, the National Library to lose 6.5% and the National Film and Sound Archive nearly 7% of its workforce.

Indigenous Affairs:
AIATSIS has received extra funding, the Indigenous Land Council has received help to pay off the Ayres Rock Resort (purchased by their former board under strange circumstances) and there is an Indigenous Student Success Program mentioned, however there are few details, at present, on what this entails.

-The Coalition ridiculed Labor for their plans to raise taxes on tobacco and has now adopted it.

-Scott Morrison was in favour of addressing Negative Gearing a few weeks ago, not anymore.

No Mention Yet of:
-Renewable Energy
-Mobile Blackspots

*Currently it's 3am and I need to sleep, but here are a few more articles I've just found:

Levy changes for citrus, fodder, deer and plantation forestry.

Landcare receives $22 million funding boost in federal budget.

Conservative budget for agriculture, as Coalition looks ahead to the election.


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