The Big Picture
The government
forecasts an underlying budget deficit of $26.1 billion this financial year, which is lower than the $28.7
billion forecast in the Mid-Year Economic and Fiscal Outlook. The deficit is projected to rise to $29.4
billion in 2018-19. Treasurer Morrison chose not to promise a return to budget surplus, instead saying
the budget is 'projected' to be back in the black in 2021.
The Government's estimates are based
on economic growth 'rebounding' from 2.5 per cent to 2.75 per cent next year and 3 per cent beyond that.
Inflation is expected to hover around 2 per cent while unemployment will reduce slightly from 5.75 per
cent this financial year to 5.5 per cent next year.
Roads, rail and runways
The government announced a multi-billion dollar infrastructure program, including the previously
announced $5.3 billion second Sydney airport at Badgerys Creek. The government will form a new Commonwealth
company to build the project over the next 10 years.
A further $10 billion will go to a National
Rail Program to fund urban and regional rail projects over the next 10 years. $8.4 billion, meanwhile,
will be spent on a Melbourne to Brisbane inland rail to allow freight to travel between the two cities
in under 24 hours.
The government will also fund State infrastructure projects. These include
$1.6 billion to West Australia for road and rail projects, $844 million towards Queensland's Bruce Highway
and $1 billion for regional rail upgrades in Victoria with a further $30 million for Tullamarine Airport
rail planning.
More funds for education
Schools, early childhood
education and skill training are also in for a boost in funding. Schools will get a $18.6 billion boost
over the next decade. Under the plan dubbed 'Gonski 2.0', most schools will receive more money while some
wealthier schools will lose some funding.
Early childhood education will receive an additional $428
million over two years while $1.5 billion will go to the States and Territories over four years for a
new Skilling Australia Fund for apprenticeships and traineeships.
Offsetting this are revenue producing
changes to university funding. Students will pay more for their bachelor degrees and will have to start
repaying their student loans earlier once they enter the workforce.
Housing affordability
The news is better for younger Australians on the housing front. While the Treasurer says there
are no 'silver bullets' to improve housing affordability, he unveiled a number of measures to help first
home buyers and increase housing supply.
The government will help first home buyers build a
deposit with the introduction of a superannuation-style salary sacrifice savings account. From 1 July
2017, individuals can make voluntary contributions of up to $15,000 per year and $30,000 in total to their
superannuation account to purchase a first home.
At the other end of the housing market, people over
65 will be encouraged to sell their large family homes, downsize to something smaller and put up to $300,000
into superannuation as a non-concessional (after tax) contribution.
The 'good debt' infrastructure
philosophy will be extended to housing with the introduction of a UK-style 'bond aggregator' as an intermediary
to attract more private sector investment in affordable community housing. In another sweetener, the capital
gains tax discount on the sale of investment property will increase from 50 per cent to 60 per cent for
investments in affordable housing.
The government will also boost the supply of land for housing
construction with the release of surplus Commonwealth land beginning with Defence land in Maribyrnong,
Melbourne.
Health
In a surprise move, the Medicare Levy will be
increased from 2 per cent to 2.5 per cent of taxable income from 1 July 2019. The proceeds will be used
to ensure the National Disability Insurance Scheme is fully funded in two years' time.
The government
will encourage doctors to prescribe cheaper generic medicines rather than name brands. The saving will
allow $1.2 billion to be used to fund the listing of new medicines on the taxpayer-funded Pharmaceutical
Benefits Scheme.
As a sweetener for doctors, the freeze on Medicare rebates that GPs are paid for
bulk-billed patients will be lifted from July 1 instead of 2020 as previously planned.
The
government has also allocated $347.4 million to Veterans' Affairs for programs including mental health
and suicide prevention.
Business and banking
The government is
seeking to raise $6.2 billion over the next four years by imposing a six-basis point levy on the five
major banks. This new tax won't be imposed on superannuation funds or insurance companies.
The government
also plans to introduce a suite of measures to improve competition and transparency in the banking system.
It will set up a one-stop shop for dispute resolution for consumers, small business and investors to be
known as the Australian Financial Complaints Authority. This will replace three existing regulators.
After initial success by the Tax Office in its crackdown on multinational corporations not paying
their fair share of tax, the program will be extended to include foreign partnerships and trusts.
Small business owners with turnover of up to $10 million will be able to write off up to $20,000 on
assets purchased for their business for another year. The measure was due to end on June 30.
Welfare carrots and sticks
Younger Australians and families will face the
brunt of cuts to welfare spending, with penalties including reduced or cancelled payments for not turning
up for job interviews or accepting suitable work.
To balance this tough approach, programs to help
young parents find jobs, childcare and training will be extended, while aged pensioners and disability
pensioners will get a one-off payment to help with rising energy bills this winter.
The Government
will also reinstate the Pensioner Concession Card for those impacted by the asset test change introduced
in January this year.
Immigration and border protection
In a
revamp of the heavily criticised 457 visa system, $1.2 million will be raised from a levy on foreign workers
to help fund training for local apprentices.
Defence spending will increase to 2 per cent of
GDP by 2021, three years ahead of schedule.
Looking ahead
The
lift in infrastructure spending is welcome news for the construction industry in the short to medium term
but it should also have long term social and economic benefits for the nation.
It needs to
be remembered though that the budget announcements are just proposals at this stage. They need to be passed
by both houses of Parliament before they become law.
The Turnbull government will be hoping a budget
that balances productive spending on infrastructure, schools and health with cuts to everyday spending
and help for people struggling with the cost of living will give it a fresh start with voters. |
