Not quite Santa Claus but a little in it for everyone

Budget Highlights

  • Revenue: $486.1 billion in 2018-19.
  • Expenditure: $488.6.3 billion in 2018-19.
  • Budget Position: Deficit of $14.5 billion in 2018-19 with a return to surplus of $11 billion in 2020-21.
  • Inflation: 2.25% per cent in 2018-19.
  • Real GDP growth: 3 per cent in 2018-19.
  • Unemployment forecast: 5.25% per cent in 2018-19.

 

With a speech that was part report card and part overture to the everyman, Treasurer Scott Morrison has given the maiden speech of the next Federal election with a clear message to voting Aussies: stick with us, and we’ll deliver.

Nestled beneath ScoMo’s catchcry of “clearer, simpler, fairer” there was something for almost everyone in this Budget – you may just need to wait for it. The Treasurer championed personal tax cuts throughout the Budget process, and has delivered with a seven-year personal income tax reform plan. Low and middle-income earners will receive tax relief from 1 July 2018 with plans to address bracket creep and simplifying the tax system in the longer term. It’s a shrewd political play, deftly changing the conversation to ‘tax cuts for all’ while wage rises remain elusive. The Treasurer was careful to emphasise the cut is “not a give-away, it’s their money” with the measures representing a seven-year carrot: Australian voters will need to tick the ‘Liberal’ box at the next election, and potentially the one after that, before they’ll see significantly more money in the bank.

The usual suspects of ‘jobs and growth’ and a strong economy all got a look in with the Government crowing about the improvement in the Budget bottom line which will see us return to a small surplus of $2 billion in 2019-20. Buzzwords like ‘innovation’ were eschewed in favour of the classic Liberal narrative of ‘living within our means’. If individuals are at the centre of this Budget, Baby Boomers are in the spotlight with the Treasurer announcing measures to keep older Australians in their home, and working longer if they choose. Major boomer investments include $1.6 billion in home care, increasing access to aged care in regional areas, wage subsidies to incentivise businesses to employ older Australians and creating the Skills Checkpoint for Older Workers program all designed to woo the ‘grey constituency’.

Trains, planes and automobiles will all get a boost with $75 billion in big infrastructure plans slated to better connect cities, regional and rural areas and to reduce traffic congestion. The funding builds on the Liberal’s massive infrastructure push in the 2017-18 Budget with big investments – this time coupled with more in the ‘kitchen table budgets’ of working Aussies – designed to stimulate the economy. Despite the projects in the pipeline, the cash splash in transport and infrastructure comes with a delicate caveat: with the states set to foot the bill for about half the funding of the big projects, there may be still a political fight ahead before they come to fruition.

Focusing on high-quality, affordable essential services at every stage of life, health and education funding continues to ensure Australians feeling the pinch have the access they need. An additional $12.4 billion in the health portfolio has allowed the Government to pump more money into Medicare services, fund a new hospital deal with the States and more money for rural and mental health. A National Health and Medical Industry Growth Plan of $1.3 billion, including a ground-breaking $500 million Australian Genomics Health Futures Mission has been Minister Hunt’s passion project.

All up it’s something of a Robin Hood Budget – with the Australian Tax Office in the titular role. They’re not robbing Peter to pay Paul, they’re holding the crooks to account to pay for a large chunk of the breaks on offer. The ATO’s Black Economy Taskforce has dodgy businesses in their cross hairs with measures to claw back lost dollars from illicit tobacco, ‘phoenix’ companies and cash-only operators which evade their tax. In an effort to crack down on money laundering, cash payments for goods and services will be capped at $10,000 and business will face an additional reporting burden for money paid to security providers, road freight transporters and computer system design.

 

‘Room for improvement’ was a frequent refrain throughout the Treasurer’s address and he acknowledged “the benefits are yet to reach everyone”. Certainly, there is more to do, and we’ve been urged to stick with the plan – and stick with the Coalition with the clock ticking on the next election.

Finance, Tax & Super

Providing relief to working Australians – that’s this Budget’s big promise in the tax arena, with the unveiling of a three-step, seven-year plan to see tax rates simplified and protect working Australians from bracket creep. Superannuation funds are also a target, with a strong whiff of anti-finance sector sentiment following the public outcry of the Banking Royal Commission. With the Government’s proposed corporate tax cut still on the table – and Budget measures that just may soften some of the remaining cross-benchers – this Budget outlines a range of measures to crack down on those who aren’t contributing their fair share to Australia’s tax pool, individuals and businesses alike.

Key Measures:

  • Introducing a personal income tax plan over the next seven years ($13.4 billion over five years):
    1. A new Low and Middle Income Tax Offset of up to $530 per year for low and middle-income earners.
    2. Increasing the top threshold of the 32.5 per cent income tax bracket from $87,000 to $90,000.
    3. Reducing the number of tax brackets from five to four by 2024, completely removing the 37 per cent bracket.
  • Delivering the Black Economy Taskforce recommendations (savings of $5.3 billion over four years).
  • Release of a discussion paper that will explore options for taxing digital business in Australia.
  • Protecting your super package including banning superannuation exit fees; a 3 per cent annual fee cap for accounts with less than $6,000; linking lost super back to active accounts; and changing insurance arrangements for young people (savings of $863.6 million over five years).

Health & Aged Care

Health Minister Greg Hunt started 2018 with three priorities on his to-do list and last night he ticked off all three – a new funding agreement with the states on public hospitals (although Queensland and Victoria are refusing to sign), more money into mental health, and an $83.3 million Stronger Rural Health Strategy to increase the number of skilled health professionals in rural and regional Australia. With record funding for Medicare, you wouldn’t think Hunt had much else in the kitty, however, he had the benefit of two credit cards to use during this budget process – including $2 billion from the Medical Research Future Fund (MRFF) – and he has done so wisely. This includes a $1.3 billion National Health and Medical Industry Growth Plan to improve outcomes and attract medical sector jobs, research and clinical trials, and a $500 million investment in genomic health program will improve Australian’s access to genetic testing.

 

Key Measures:

  • More Choices for a Longer Life program including an additional 14,000 home care places, improved access to aged care services in rural, regional and remote areas, and increased mental health services in residential aged care facilities (savings of 19.5 million over five).
  • Drawing down on the MRFF to fund interventions in mental health and suicide prevention, regional health, preventative health and behavioural economics, as well as women’s health ($275.4 million over 10 years).
  • Six medicines added to the PBS for refractory multiple myeloma, relapsing-remitting multiple sclerosis, human immunodeficiency virus, relapsed or refractory Hodgkin lymphoma, spinal muscular atrophy, and breast cancer ($1.4 billion over five years).
  • Improvements in the administration of the Life Saving Drugs Program including the introduction of pricing policies similar to those that apply to the PBS agreement ($5.4 million over five years).
  • Promoting the use of generic and biosimilar medicines to save $335 million ($5 million investment over three years).

 

Defence & National Security

The Government showed creativity with their new mantra, ‘stop the boats and keep them stopped’ and continue to assert itself as the tough-on-borders party. Congestion may stop us in our tracks when trying to negotiate our next flight check in with a push to harden up airport security. A nationwide criminal intelligence system will be at the fingertips of law enforcement and intelligence agencies, the establishment of new centre will counter child exploitation and we will see our defence force set up to compete in the international market continuing to focus on the Defence Export Strategy.

 

Key Measures:

  • Increasing the presence and specialist capabilities of the Australian Federal Police and the Border Force at nine major domestic and international airports ($121.9 million over four years).
  • Enhanced security at 64 regional airports ($50.1 million over four years).
  • Enhanced screening capability for inbound air cargo and international mail with new and upgraded equipment and advanced technology ($121.6 million over four years).

 

Industry, Innovation & Small Business

Giving with one hand but potentially taking with the other threatens to derail the Government’s messaging for business. Cuts to the top company tax rate remain on the table, and the Government is looking to pick winners in the medical research and science space with targeted investment for these industries. However, reforms to the R&D Tax offset may destabilise many larger organisations who operate in this space. Small businesses are set to benefit from the extension of the $20,000 instant asset write-off, though not making this permanent is beginning to frustrate the sector. Funding for innovation continues to fall short with $1 million to “support a review of existing domestic and international measures of innovation” designed to potentially show – and “sell” the success of the PM’s innovation agenda.

 

Key Measures:

  • Revamp of the R&D tax incentive including the introduction of an R&D premium that ties the rates of the tax offset to the incremental intensity of R&D expenditure (savings of $2 billion over four years).
  • Investment in public technology infrastructure for technology/ science ($2.4 billion over four years).
  • Extending the immediate deductibility threshold ($20,000) for small businesses by 12 months to 30 June 2019 for businesses with a turnover less than $10 million ($350 million over one year).
  • An extra $250 million for the Skilling Australians Fund to deliver business with the people and skills to grow.

 

Infrastructure & Transport

Significant funds have been directed to infrastructure, taking advantage of the better than expected returns and budgeting rules ScoMo made a few years ago to take infrastructure out of the Budget bottom line. Large chunks of this money will go to marginal seats and swinging areas, and there is a focus on links between cities, and between outer suburban areas and the cities – with the regions getting a comfy $3.7 billion for the new Building Better Regions Fund and the Regional Australia Institute. The Federal Interstate Registration Scheme will be scrapped, a $71 million annual saving that will contribute to funding this massive infrastructure program.

 

Key Measures:

  • $5 billion for the Melbourne Airport Rail Link.
  • $3.3 billion to upgrade the Bruce Highway, Queensland.
  • $1.4 billion for Adelaide’s North-South Corridor.
  • $1.1 billion for Perth’s Metronet Projects.
  • $1 billion to Queensland’s M1 Pacific Motorway upgrades.

 

Education & Training

With school and higher education reforms legislated through last year’s Budget, the education and training portfolio took an unfamiliar back seat in this year’s Budget. An agreement with the states will allow the funding for early childhood education to be extended for another two years. Young people from regional, rural and remote areas will receive more support to transition to further education, training and employment and in the age of cyber bullying, school students’ wellbeing will continue to be supported through pastoral care.

 

Key Measures:

  • Extending the National Partnership Agreement on Early Childhood Education ($441.6 million over two years).
  • Continuing the National School Chaplaincy Programme ($247 million over four years).
  • Funding to implement the Government’s response to the Independent Review into Regional, Rural and Remote Education ($96.1 million over four years).

 

About Us

Parker & Partners is Australia’s leading public affairs agency. We’ve been building effective working relationships between our clients, the public and Australian governments since 1998. We are a non-partisan agency, which sets us apart. We offer our clients high-level counsel, access and expertise in the workings of policy at all levels regardless of the administration of the day. We know the processes and nuances of government, policy making and media and guide our clients through often complex issues to achieve successful outcomes. Please contact us for all your Government Relations needs at canberra@p-p.com.au