The social and political priorities entailed in the Australian Government Budget 2019, ahead of the expected May elections, evince a long-term strategy to drive the economy upward, guarantee essential services, keep the stakeholders secure, restore faith in the government and perhaps woo the voters. In 2013-14, precisely five years after the worldwide economies were hit by the Global Financial Crisis, Australia was still running the second highest deficit following which the Government embarked on the path of steady progress to repair the budget and chart a responsible way back up.
Finally, after more than a decade of experiencing deficits, the budget has arrived at a surplus of around $ 7.1 billion for the upcoming fiscal year in line with the government’s agenda to reduce debt via effective management policies supporting economic growth and not traditionally through higher taxes. The idea is to build surpluses over the upcoming years that would exceed one per cent of the GDP in the medium term by maintaining a sustained fiscal discipline.
Currently, Australia’s economy is actively supporting jobs growth with over 1.2 million employment opportunities generated since 2013. Going forward, the government anticipates less consumer spending. However, at the backdrop of the prevailing trends which includes housing prices sliding, lower interest rates, low price inflation, slow wages growth, and plunging confidence in the global economic outlook, a big budget is something that could reinstate confidence and keep the people in jobs.
These are exciting times for Australia’ federal fiscal finances when the budget is centred around $ 158 billion worth of tax cuts accompanied by increased expenditure on infrastructure (a record $ 100-billion in funding for road and rail projects) and bigger surpluses. More than $ 8 billion extra will be extended into the tax refunds received between July and September this year, reflecting around two per cent boost to the typical after-tax wage. While the wage growth is also around two per cent, the income of the citizens would grow twice as fast as they anticipated, with the new regime in place.
Broadly considering, an income-tax cut does not cover the interest of everyone. As commonly believed, one-off tax cuts are not that a sustainable tool for long-term growth than sustained wages growth.
For instance, a lot of Australians are underemployed, and if one is below the tax-free threshold of $ 18,200 per annum, then he/she is not liable to pay taxes anyway. Besides, a majority of senior citizens living on pensions and other support payments do not pay taxes as well. To address this going concern, an amendment extending an energy rebate to the unemployed (without existing benefits) was introduced a day after the Budget was released. In addition, the budget also contains a one-off cash rebate for pensioners of around $ 75 for an individual and $ 125 for couples to assist with rising energy costs.
Conclusively, despite a holistic approach to ensure that all segments are benefitted, there are always the winners and the losers in a large diversified economy.
The future generations and individual taxpayers will particularly avail the perks of the recent budget as it assures a total of ~ $ 302-billion personal tax cuts to be rolled out over the next ten years. The tax offset for medium and low-income citizens will be up to $ 1,080 for single earners and $ 2,160 for dual income families. The bottom line will be lifted to $ 30,000 for small business instant asset write-off and now includes businesses with a $ 50-million turn over as well. Other features of the budget include reduction in tax rates by 25% for small companies with less than $ 50-million turnover, by 2021-22. Around $ 282 million for 10,000 home care packages for older citizens will be provided, and an additional $ 7.7 billion over three years will be expended in improved MRI scan services for patients with breast cancer.
The medical research funds will be boosted by $ 5 billion along with a grant of $ 737 million over seven years for mental health patients. A $ 337-million drug strategy to address the fatal effects of tobacco, alcohol, ice and opioids will also be executed.
Moreover, the regulators will be extended around $ 600-million funds for the banking Royal Commission fallout. An extra $ 525 million will be extended for vocational education, $ 93.7 million worth of scholarships for regional students over four years and $ 453 million boost for pre-school education in 2020.
The losers in the whole dynamics include tax evading multinationals that would be targeted by ATO (expected to raise $ 4.6 billion), accountants, consultants, and also the state governments that lost $ 10-billion in GST revenue triggered by the property downturn. The research and development incentive would be further cut by $ 1.35-billion, causing distress to the start-ups.
Evidently, the Government has been successful is toning down the debt and has put Australia’s finances on a more sustainable footing with an ambition to eliminate the net debt by 2029-30.
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