After a series of well-scheduled leaks that led the national debate since weekend, the actual 2018 Federal Budget that was announced last night had very few surprises, confirming what was already known – mostly that it is a budget designed to please the elderly and middle-class Australians. In other words, it is the definition of an election budget.
In his announcement, Treasurer Scott Morrison predicted that the economy will return to surplus next year and predicted a surplus of $2.2 billion by 2019-2020.
This is largely due to the increase in tax revenue, which is estimated to be around 25.3 percent of the GDP for the following two years. This increase in revenue is in its turn largely due to an increase of the workforce population.
TAX CUTS AT THE FOREFRONT
In terms of tax relief, the Budget is relatively modest, offering no more than $530 per year (delivered in the tax return statement) for middle and lower income earning individuals. This particular benefit starts at $200 for those earning up to $37,000 a year, increasing incrementally to $530 a year for 4.4 million people earning between $48,000 and $90,000. The benefit gradually decreases to zero at a taxable income of about $125,000. This is estimated to cost a modest $13.4 billion over the next four years, reaching $140 billion over a decade.
As part of a tax reforms program, its impact should be considered alongside the government’s determination to eliminate bracket creep by 2024-25. The first step will be the increase of the top threshold of the 32.5 per cent tax bracket from $87,000 to to $90,000 from the 1st of July. From 2022-23 this threshold will increase to $120,000, while at the same time, the top threshold of the 19 per cent tax bracket will go from $37,000 to $41,000. This will be abolished by 2024-25, when the tax-free threshold will remain at $18,200, while a 19 percent tax rate will apply up to income of $41,000, followed by a 32.5 percent rate for incomes up to $200,000.
THE BUDGET COST IN BRIEF
The total cost to the Federal government stands at $488.6 billion. Of this sum, $176bn (i.e. 36 percent) will go to social security and welfare, most specifically aged assistance ($66.8bn), assistance to people with disabilities ($48bn), family assistance ($36.8bn) and the unemployed ($10.2bn); $78.8bn (16.1percent) will be allocated to the Health sector (including $32bn for medical services and benefits and $21.2bn in assicance to the states for public hopitals); $34.7bn (7.1percent) will go to Education (including 7.7bn for government schools, 11.8bn for non-government shcools and 9.6bn for higher education); $31.2 bn (6.4 percent) will be allocated for Defence and $23bn (4.7percent) for General public services.
AGED CARE WINS BIG
Older Australians are the cornerstone of the budget measures, particularly since last year’s reforms to pension and superannuation didn’t go too well with older age groups. The 2018-19 budget is specifically focused on the aged care sector, which is among the biggest winners of last nights announcement. The budget allocates $1.6 billion for 14,000 new places for home-care recipient and another $1.6 billion to add 13,500 residential aged care and 775 short-term care places for elderly Australians. Furthermore $82.5m will go to mental health services in aged care facilities.
As for older Australians who remain active despite old age, an incentive for pensioners with part time employment, will allow them to earn up to $300 a fortnight without affecting pensions.
FOCUS ON INFRASTRUCTURE PACKAGES
The 2018 Budget includes a $24.5 billion infrastructure package for major transport projects and initiatives as part of a $75 billion rolling plan over the next decade, addressing specific needs in each state and territorry, most specifically:
- $7.8bn for Victoria (including $5 bn towards the Melbourne airport rail project, $1.75 bn towards the North East Link and $475m for Monash Rail).
- $2.8 bn for Western Australia (including $1.05bn for Metronnet rail, $944m for a Perth congestion package and $560m for the Bunbury Outer Ring Road).
- $1.8bn for South Australia (including $1.2bn for the North-South Corridor and $220m for the Gawler Rail Line electrification).
- $1.5bn for New South Wales (including $971m for the Pacific Highway Coffs Harbour Bypass and $400m for the Port Botany Rail Line Duplication).
- $5.2bn for Queensland (including $3.3bn for the Bruce Highway extension, $1bn for the M1 expansion and $390m for Brisbane Metro).
- $921m for Tasmania (including $461m for the Bridgewatwer Bridge replacement and a $400m Tasmanian roads package).
- $259.6m for the Northern Territory (including $100m for the Buntine Highway upgrade and $180 million for the Central Arnhem Road upgrade).
BAD NEWS FOR REFUGEES, MIGRANTS AND THE UNEMPLOYED
Two have been the most talked about numbers in anticipation of last night’s budget: the $10 per week tax relief for the lower-to-middle income earners and the $40 per week Newstart Allowance, which did not go to $50, much to the disdain of Unions and economists that have been campaigning for a rise.
And if being unemployed was not a qualifier in itself to put somebody on the 2018 Budget losers’ list, there are those who have it worse – most particularly migrants who are not even eligible for Newstart, or other welfare benefits, until they have resided in Australia for four years – up from three that is the prerequisite now. The waiting period for refugees to accees employment services, also rises from 13 to 26 weeks, a cut estimated at $68.1million.
As far as refugees are concerned, the Budget makes provisions for the continuation of the Operation Sovereign Borders (which included offshore resettlement arrangements), allocating $62.2m over the next two years for its funding. This is one of the major gains of the Department of Home Affairs, alongside the $293.6m allocated over four years to increase security at 64 regional airports, upgrade screening in inbound air cargo and mail, and increase AFP and ABF officers at airports.
Home Affairs Minister Peter Dutton, as well as other conservatives in the Coalition, should also be happy with the news that $83.7 million will be cut from the ABC from 2019-20 to 2021-22 as the government indexes funding at the 2018-19 rate.
On the contrary, SBS will receive $17.6m over the next two years for SBS to produce and distribute more Australian content. This includes $14.6m. to replace revenue anticipated in legislation that would have loosened restrictions on SBS advertising that didn’t pass Parliament.