In contrast to the first budget delivered by the Tony Abbott-led Coalition Government in 2014, the Federal budget from Australia’s Treasurer Scott Morrison in Canberra tonight was about not upsetting anyone, other than people earning less than $80,000 a year (who didn’t receive a tax cut) or smokers who will cop a big rise in tobacco excise. In fact it was carefully crafted not to impact anyone who is a “swinging voter” for an election that will be held on July 2. As such it is a campaign manifesto rather than an economic document with the key focus to upset as few people (read voters) as possible. As every Minister interviewed in the media said tonight, the budget is about jobs and growth.
Key measures include:
- $670 million expenditure and 1,000 new employees for the Australian Taxation Office to pursue multinational companies operating in Australia who transfer their earnings offshore, with 40 percent tax on diverted profits;
- An additional $1.2 billion on education designed to reward excellence including high-performing teachers;
- A ten year plan to increase investment and reduce company tax (ultimately to 25 percent) with immediate cuts to SME’s turning over less than $10 million who will benefit from a 1 percent reduction to 27.5 percent from 1 July;
- $2.9 billion more funding for public hospitals;
- $4.7 billion from increased tobacco excise;
- Changes to superannuation tax concessions for high income earners to save $3 billion a year;
- $840 million on programs to assist young people into jobs;
- The current financial year budget deficit will be $40 billion with spending above 25 percent of GDP.
The Turnbull Government’s 2016-2017 budget is not a traditionally conservative-style document other than an acknowledgement that the SME sector accounts for the majority of the country’s GDP, 70 percent of its employment and most future growth under Malcolm Turnbull’s new innovation-led world. In this respect the focus on SME’s is a throwback to the era of former Prime Minister John Howard which paid particular attention to this sector as a key driver of the economy. It also acknowledges that the mining boom is over and much growth will come from individual enterprise particularly millennials who want to start their own companies, not work for someone else punching a clock.
Much of the budget has been selectively leaked in the past month, more evidence that, in an election environment, you don’t (as happened in 2014) spring surprises on unsuspecting voters. Clearly the Government has consulted widely with the business community and its allies and already those commentators are singing from the same song sheet.
Two events occurred in the 24 hours before Scott Morrison rose to present his budget that assist the Turnbull Government’s electoral fortunes. The ALP Opposition made a significant error in calculating its own policy initiative in raising tobacco excise when the Treasury found a $20 billion “black hole” in their costings (which impacts the ALP’s reputation as economic managers) and the Reserve Bank of Australia reduced the official cash rate to an historic low of 1.75 percent, bringing good news for mortgage holders and borrowers.
With the budget now brought down, the Prime Minister Malcolm Turnbull is expected to visit the Governor-General as early as this week to call a Federal election for July 2. Game on, as we Aussies say.
The full budget speech can be read and viewed here
Image by JJ Harrison.