Tonight the 2016 Federal Budget was handed down by Treasurer Scott Morrison. In his opening remarks Morrison said that this is “not just another budget but an economic plan.” The Government plans to spend $450.55 billion in the next financial year.
A bit of a breakdown of where the money goes:
$159 billion will be spent on Welfare.
$71 billion on health.
$23 billion on the Public Service.
$33 billion on Education.
$11 billion on Transport and Communication.
$5 billion on Housing.
$90 billion “other purposes”
It’s difficult to recall a more challenging time for the Government – falling commodity prices, spiralling debt, slowing growth, and a deteriorating budgetary outlook. Additionally the RBA today cut interest rates for the first time in 13 months in the hope that that will stimulate the economy and stave off disinflation. Will another 25 points at these levels make much difference to domestic demand at these levels? Probably not, as the RBA has admitted.
Quoting from the Sydney Morning Herald Website.
Between the lines of the Reserve Bank governor’s brief rate-cut statement was an effective challenge to the federal government: Do something! While Scott Morrison was rehearsing his budget speech lines – and counting – it probably wasn’t what he wanted to hear.
To quote Joe Hockey in 2013: “They’re not cutting interest rates because the economy is doing well. Interest rates are being cut to 50-year lows because the economy is struggling.”
“Struggling” may be an exaggeration, but cutting the cash rate from 2 to 1.75 per cent is no vote of confidence in the economic outlook just when ScoMo is trying to talk up a rosy election-budget-driven future.
Its a Federal Election Budget but is it enough to get the Turnbull Government re-elected. I personally was disappointed in the budget. It’s really no different than any other budget. One hand giveth, the other hand taketh, promises are made that we all know probably won’t be honoured and we are promised a budget surplus sometime between now and when my 12 year old daughter checks into a retirement home. I don’t see this as some kind of Economic Plan. So they increased tax for smokers….wow ground breaking. Anyway….
Here are the majors of the Budget.
- The Government is increasing the second highest tax bracket from $80,000 to $87,000 to stop bracket creep – which is when workers are forced into a higher tax bracket through a minor pay rise, generally due to inflation. This should positively impact about 500,000 Aussie workers. This is a good measure.
- Small Business and Big Business will be getting tax cuts. This will be done gradually by increasing the number of businesses that can access the lowest company tax rate of 27.5% and ultimately reducing this lowest rate to 25%. Any measure that assists in the health of businesses is a good measure in my book as healthy businesses lead to healthier rates of employment, this impacts the economy, impacts Government revenues and across the board positively impacts families.
- New Initiative announced to help unemployed youth get into work.Its called Youth Jobs PaTH – Prepare, Trial, Hire. Look any thing that helps getting the unemployed employed has got to be given the thumbs up…assuming it deals with the reasons why long term youth are unemployed. A quick glance of this program (and it was really quick) there is a sense of the old man on his verandah looking at two unemployed young people walking past and he yells to them….go get a job ya bums. Maybe there are some broader social problems amongst the under 25’s that we are not dealing with here.
- Women will be incentivised to increase their super savings and partners will get tax offsets if they put money into their low-income spouse’s super. I think this is positive as it helps women but at the same time a tad paternalistic. Its like Morrison is saying ‘Hey Pete, throw your poor little wifey a couple of coins into her super account and we will reward you for looking after your woman: good job. Us better paid men have got look after these child bearing ones.” Maybe I am over thinking this?
- Speaking of Super, those earning over $250,000 a year will have their contribution tax rate double from 15% to 30%
- Property Investors: No changes to Negative Gearing and Capital Gains Concessions. Great if you own multiple properties. Not great if you are looking at getting into the Market. I would suggest its great if you are a renter as I think rents would go up if they wound back Negative Gearing.
- Smokers get screwed. The Government has flagged another 4 annual 12.5% increases in excise as a packet of smokes heads toward $40 a packet. Also the duty free allowance for purchasing cigarettes when you fly into the country has been reduced by 50%. Smokers are going to contribute $4.7 billion in excise over the next four years. My suggestion if you like a smoke…..the Quit line number is 13 7848.
- Each year for the next 3 years, 30,000 people a year receiving a Disability Support Pension will have to justify why they shouldn’t be kicked off the pension. If people are rorting the system then this is a good initiative. However let’s not as a nation make disabled people beg for their pension. There has to be humanity in this initiative.
- The Government is cracking down on multinational companies taking their profits off shore and avoiding paying their fair share of the tax burden. This is good thing.
- Between 2018 and 2020 the Government will provide an additional $1.2 billion in funding for Government and Non Government Schools. Gonski fans will be disappointed that Morrison simply doesn’t give a Gonski.
- I like the new program announced that will see Chronically ill Aussies transitioned out of hospitals and be treated in their own homes. There will be a $21 million trial to see how it works.
- Half a billion dollars has been allocated toward a Brisbane Melbourne inland railway. When this is completed every train will take 110 B Double Trucks off our highways. Unless you drive a truck, this measure would have to be celebrated. Less trucks on the road is good all round.
- $15 million dollars is going to be spent giving Carp in the Murray River Herpes. This is not a major announcement but I had to include it.
- The idea of Uni Fee Deregulation has been abandoned. I am not sure this is a good thing. Sure we all got scared when Labor said we would end up with $100k degrees, but I do wonder whether more competition amongst universities would be a good thing to take the higher education sector to new levels. I don’t really know.
- The ATO is getting 1000 specialist staff for its new Tax Avoidance Taskforce.
So that’s the majors. Its a beige budget which thankfully happens to be Prime Minister Malcolm Turnbull’s favourite colour. Will it get him re-elected…..What will get him re-elected is the fact that Bill Shorten is the alternative Prime Minister.
Anyway, That’s what I think
Ps Peter Pilt
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