The future starts now. That is the rallying call from the Abbott Government after the big reveal on a Budget that has reset the foundations of some key government programs and hinted at bigger changes to come.
From a macro point of view, the big bet is crimping consumer spending with a new tax on the rich, patient charges for doctor visits, higher co-payments for medicines, more expensive petrol and making welfare harder to get, won’t drag on an economy that’s already growing below trend.
The Budget papers show the Government expects the economy will grow by just 2.5 per cent in 2014/15, picking up to 3 per cent in the next financial year. Unemployment is expected to rise from the current 5.9 per cent to 6.25 by mid-2015. Wages growth is expected to trail inflation this financial year, meaning the Budget measures won’t be the only depleting force on hip pockets.
The economy’s get-fit program is set to take time. Many of the new measures announced – such as a dedicated fund for medical research, ring fenced to prevent any re-purposing – will take time to build up a head of steam and will be funded by savings elsewhere in the health budget. Embedding a user pays mentality across the health system will yield billions of dollars of savings that, the Government hopes, will not only fund what is expected to be the biggest health research fund of its kind, but also keep demand for health services in check.
Restoring balance to a Budget where spending has increased at a much faster pace than revenue will take at least four years. A surplus isn’t expected until 2019-20 and until then, as promised, Treasurer Joe Hockey has done his best to ensure as many as possible feel some degree of pain.
The expected “Budget repair levy” of 2 per cent on those earning more than $180,000 will kick in from July 1 and remain in place for three years while the salaries for MPs and senior public servants salaries are frozen for a year. The ‘smaller, less interfering government” promised by the Treasurer will need 16,500 fewer public servants over the next three years. Many Government agencies, authorities and bodies will be shrunk, melded or abolished altogether.
As expected, all Australians born after 1965 will have to wait for their 70th birthday to qualify for a pension. To get business used to older workers, the Government will pay companies up to $10,000 to employ someone aged over 50 who has been on unemployment benefits/the disability support pension for more than six months.
Some 800,000 businesses are also expected to benefit from a cut in the corporate tax rate of 1.5 percentage points; good news for 800,000 businesses around the country. But the 3,000 largest companies face a 1.5 per cent levy to fund the Government’s amended parental leave scheme.
The Treasurer is clear in what he expects to achieve: a sustainable welfare system, the biggest medical research endowment fund in the world in six years, a strong defence and security capability, a $125 billion wave of spending of new infrastructure and a sustainable level of overall Government spending. But this new “age of opportunity” will, the Treasurer promised, make demands of all.
“The time to fix the Budget is now. The time to strengthen the economy is now. The time for everybody to contribute is now.”
In past decades Australians have responded to rallying calls made in the midst of national emergencies or great upheavals. But thanks to the longest unbroken stretch of economic expansion in our history, we haven’t been asked to tighten our belts for quite some time.
On Budget night, Joe Hockey sought to change that.