After a series of well-scheduled leaks that led the national debate since the previous weekend, the actual 2018 Federal Budget that was announced on Tuesday night had very few surprises, confirming what was already known – mostly that it is a budget designed to please elderly and middle-class Australians. In other words, it is the very definition of a pre-election Budget.
In his announcement, Treasurer Scott Morrison predicted that the economy will return to surplus next year, and a further 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 per cent of the GDP for the following two years. This increase in revenue is, in turn, largely due to an increase in the workforce population; an aftereffect of skilled migration, though migrants (and refugees) are among the losers of the Budget.
TAX CUTS AT THE FOREFRONT
In terms of tax relief, the 2018 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, which has been the centrepiece of Scott Morrison’s announcement and has already been widely debated, 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 reform 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 $90,000 from 1 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 per cent tax rate will apply up to income of $41,000, followed by a 32.5 per cent rate for incomes up to $200,000.
COSTS AND ALLOCATIONS
The total cost to the Federal Government stands at $488.6 billion. Of this sum, $176bn (36 per cent) will fund 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 (16.1 per cent) will be allocated to the health sector (including $32bn for medical services and benefits and $21.2bn in assistance to the states for public hospitals); $34.7bn (7.1 per cent) will go to Education (including $7.7bn for government schools, $11.8bn for non-government schools and $9.6bn for higher education); $31.2bn (6.4 per cent) will be allocated to defence, and $23bn (4.7 per cent) to general public services.
In terms of national investments, 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 territory, most specifically:
- VIC $7.8bn including $5bn towards the Melbourne airport rail project, $1.75bn towards the North East Link and $475m for Monash Rail.
- WA $2.8bn including $1.05bn for Metronet rail, $944m for a Perth congestion package and $560m for the Bunbury Outer Ring Road.
- SA $1.8bn including $1.2bn for the North-South Corridor and $220m for the Gawler line electrification project.
- NSW $1.5bn including $971m for the Pacific Highway Coffs Harbour Bypass and $400m for the duplication of the Port Botany freight rail line.
- QLD$5.2bn including $3.3bn for the Bruce Highway extension, $1bn for the M1 expansion, and $390m for Brisbane Metro.
- TAS $921m including $461m for the Bridgewatwer Bridge replacement and a $400m Tasmanian roads package.
- NT $259.6m including $100m for the Buntine Highway upgrade and $180 million for the Central Arnhem Road upgrade.
FRONDITHA WELCOMES THE AGED CARE PROVISIONS
Older Australians are the cornerstone of the Budget measures, particularly since last year’s reforms to pensions and superannuation didn’t go too well with older age groups. The Budget includes an incentive for pensioners with part-time employment, which will allow them to earn up to $300 a fortnight without affecting their pension. This was hailed as a positive move, despite the fact that pensioners are to lose the current $14 per fortnight energy payment, something that the Opposition has condemned as cruel.
The most positive effect on the elderly population will be indirect, though, coming in the form of services from the aged care sector, which is among the biggest winners of Tuesday night’s 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.
“The Aged Care minister has his ear to the ground,” George Lekakis, Fronditha Care’s CEO told Neos Kosmos. “He has consulted with the sector extensively, including us. The fact that they are opening another 13,500 aged care places means that we can create more beds to care for these people, and we are going to apply for more packages, so that we can look after people in their own homes.”
The impact of this funding will be broader than that, he stresses. “The flow of an increase in meeting people’s needs will mean that we will employ more staff to be able to deliver these services into the future.”
With 200 people on the waiting list for an aged care bed in the organisation’s facilities in Melbourne, it is not difficult to understand why this Budget provision is significant. According to Mr Lekakis, the high demand is a rising trend, largely due to the population of the ‘first’ generation of Greek migrants, those who came to the country in the postwar period.
“We’ve done an analysis of the aged care population in the Greek community and we estimate that we will continue with high demands for the next 10 years,” he explained.
STEPS IN THE RIGHT DIRECTION FOR BUSINESSES
Small businesses are among the winners of the Budget, as the government extends the $20,000 instant asset write-off for another 12 months to 30 June 2019. This is the only ‘new’ feature regarding business, as the Treasurer refrained from allocating funds to the business sector, though the government remains committed to its 10-year plan to reduce company taxes from 30 to 25 per cent.
“The Federal Budget 2018 is heading in the right direction but business would have liked more ambition for long term budget repair and decreased reliance on increasing tax revenue,” Paul Nicolaou from the Australian Chamber of Commerce and Industry said to Neos Kosmos. “While there are positive announcements in this Budget, the projected surplus might be difficult to sustain without a stronger buffer should the global or domestic economic outlook prove weaker.”
The Budget “underlines the need to encourage the business community to invest, create wealth, and employ – in order to provide the stable foundations for the economic growth on which the budget forecasts depend,” Mr Nicolaou added.
“The delivering of personal tax cuts and staying the course to deliver business tax cuts will assist thousands of working Greek Australians and those who own businesses across the country. In addition, the extension of the instant asset write-down for small businesses for a further year will help greatly Greek Australians who run small businesses,” he concluded.
YES TO TECHNOLOGY, NO TO ARTS
Apart from roads and railroad lines, the Budget focuses on another type of infrastructure, offering $1.9bn over 12 years to research programs implemented in sectors like healthcare, manufacturing, and technology. Specifically, $41m is going towards seed funding for an Australian space agency, while $29.9m over the next four years will go toward investment into artificial intelligence and research. Another $393.3m will go to the implementation of the Research Infrastructure Investment Strategy. But if the research and technology sectors are benefitting from the Budget, the same cannot be said for the arts sector, which was all but absent in the Treasurer’s statement and has been left wanting for years.
“The Federal Budget has shirked its key responsibility to offer a vision for the Australian culture,” said Esther Anatolitis, Executive Director of the National Association for the Visual Arts, in the organisation’s Budget response statement.
“And yet, this is exactly what Australians expect of our government. The invisibility of the Australia Council in the Budget does not fill the sector with confidence. After years of successive cuts made without a policy or evidence basis, discovering that there are no new funding cuts is hardly good news. Failing to fund the nation’s arts funding and advisory body at appropriate levels opens our entire sector to substantial risk. The Budget offers no vision for the next generation of artists, nor for the adventurous audiences, awed visitors and critical thinkers who create our future.”
BAD NEWS FOR REFUGEES, MIGRANTS AND THE UNEMPLOYED
Two numbers have been the most talked about in anticipation of the Budget: a $10 per week tax relief for the lower-to-middle income earners and a $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 – even former Prime Minister John Howard agreed that the Newstart rate freeze had “probably gone too long.” Now the Greens are reportedly planning to present a bill to parliament, suggesting increasing Newstart by $75 per week, in an attempt to sideline Labor.
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: particularly migrants who are not even eligible for support until they have resided in Australia for four years – up from the current prerequisite of three years. The waiting period for refugees to access employment services also increases from 13 to 26 weeks, a cut estimated at $68.1m.
“We are disappointed that the government has proposed extending the waiting period for migrants to four years for various social security payments and to introduce a four-year wait for support including carer allowances, family tax benefit and widow allowances,” said Mary Patetsos, Chairperson of the Federation of Ethnic Communities’ Councils of Australia. “This is in addition to the three-year wait already proposed in the Social Services Legislation Amendment (Encouraging Self-sufficiency for Newly Arrived Migrants) Bill 2018 which is still before Parliament.”
It’s not all negative though.
“We are pleased that the government will provide an additional $5m in 2018-2019 for community organisations assisting newly arrived migrants to integrate into Australian society through the Fostering Integration Grants Scheme,” Ms Patetsos notes.
“We congratulate the Minister for Citizenship and Multicultural Affairs on this important announcement and for consulting with, and responding to, Australia’s culturally and linguistically diverse communities.”
As far as refugees are concerned, the Budget makes provisions for the continuation of Operation Sovereign Borders (which included offshore resettlement arrangements), allocating $62.2m over the next two years in funding. This is one of the major gains for the Department of Home Affairs, alongside the $293.6m allocated over four years to increase security at 64 regional airports, upgrade screening of inbound air cargo and mail, and increase AFP and ABF officers at airports.
The Australian Security Intelligence Organisation (ASIO) will also receive a funding increase of $24m for operations, plus $18m for a legal review, along with $52m for intelligence oversight.
Home Affairs Minister Peter Dutton, as well as other conservatives in the Coalition, should also be happy with the news that $83.7m will be cut from the ABC from 2019-20 to 2021-22 as the government indexes funding at the 2018-19 rate. In contrast, SBS will receive $17.6m over the next two years 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.