Treasurer Santa Claus prepares for his night of giving

With 36 hours to go, the paint is drying on the battle lines that have been drawn ahead of the next election.

Rivers of gold have provided the Government with the unique ability to combine personal tax cuts – targeted at low and middle-income earners – while pouring additional money into infrastructure and essential services for Australians doing it tough as a result of record low wage growth.

In doing so, the Government is creating a point of difference with the Opposition – the party of low tax vs. one of high tax; the party with a strong economic record and huge infrastructure spending – while negating areas of strength for the Opposition in health and education. Addressing the growing social divide, the Coalition will be walking the tricky line of loosening the purse strings to help win the next election while continuing the Budget surplus trajectory.

Ahead of tomorrow’s tabling, here’s what we know so far:

Bringing the Budget back to surplus sooner

An earlier than expected return to surplus – potentially 2019-20 – is the lynchpin to this Budget and will minimise criticism that the Government is splashing cash at the electorate. Although, when you have Pauline Hanson explaining the difference between surplus, revenue and net debt on breakfast television, you know you’re in trouble.

While handing out personal tax cuts

The Treasurer had a single focus during his Budget period – to deliver personal tax cuts – and is expected to do so with “modest” tax cuts for low and middle-income earners. The Budget is also thought to include a plan to cut tax rates and thresholds for wealthier Australians, but over the longer term. A crackdown on illicit tobacco, expected to deliver $3.6 billion, continues the Government’s focus on pulling back lost revenue. Off the table is the 0.5 per cent increase in the Medicare levy to fund the NDIS with the Treasurer determined not to undermine his ‘low taxing party’ mantra.

Building a big Australia

No changes mooted to our immigration intake has forced the Government’s hand, with investments to make room for the next million or so new arrivals over the coming five years. This is expected to be an infrastructure Budget – there is no doubt about it. The Government will commit to major spending on infrastructure where it matters most – Victoria, Queensland and Western Australia – ALP states where the Coalition must improve in the polls. Indeed, gone will be the days of taking the Sky Bus into Melbourne, with the Government picking up a majority of the $5 billion tab for the Melbourne Airport train link.

Industry stands to win

Industry maybe happy from tomorrow’s Budget, with the potential that the Government will “pick winners” with policies that support sectors crucial to the Australian economy, alongside the expected infrastructure windfall. However, for some, it could be in with one hand and out with the other, with the Government to overhaul the $3 billion R&D tax incentive, including imposing annual limits and lifetime caps for refunds. This recommendation was made by Innovation and Science Australia’s Australia 2030: Prosperity through Innovation roadmap, which will also be funded. Also to be seen is whether the Government listens to small business and makes the $20,000 asset write-off permanent.

Essential services will receive a boost

Minister for Health, Greg Hunt, will win again in this Budget. A strong advocate for the health portfolio, Minister Hunt combines credibility amongst his Cabinet colleagues with a keen political nous, appreciating the importance of winning the electorate’s hearts and minds in this area of typical ALP strength. Record funding for Medicare is expected to be on the table, along with a $30 billion public hospital funding agreement (Victoria and Queensland are dragging their heels on signing up), and a “very significant provision” to list new medicines on the Pharmaceutical Benefits Scheme. Targeting the power of the grey vote, an aged care package will encourage older Australians to stay at home longer and Minister Hunt will tick off two of his 2018 priorities – a new mental health package, and a compact with the Australian College of Rural and Remote Medicine to increase the number of doctors in rural and regional areas.

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