And it’s that time of year again – Budget 2013-14 has been released, full of figures, policies and ideological gobbledygook. Never fear, the ESSA budget wrap-up will get you across the headline data, big ticket spending items, new sources of revenue, as well as the reactions of the major stakeholders and political parties!
Federal Treasurer Wayne Swan has announced that Australia is now nearing the end of the ‘age of entitlement’, revealing that the Government will make $43 billion in spending cuts in 2013-2014, with a further $121 billion in savings expected over the next 11 years. In terms of general forecasts:
- Revenue – projections have been downgraded by as much as $60 billion thanks to the high Australian dollar and weak commodity prices, set at $387.7 billion for 2012-2013.
- Debt – national net debt is predicted to reach $191.6 billion in 2014-2015, making for Australia’s most substantial debt since the 1999 financial year. This comes as gross national debt is set to hit as much as $282 billion by June next year.
- Deficit – Mr Swan also announced a $19.4 billion deficit for 2013-2014, less than half last year’s $43.4 billion deficit result. This comes as government spending growth will be maintained at an average of less than 2% per year.
- Economic Growth – as Australia prepares to wean itself off mining as a major source of growth, economic expansion has been cut to forecasts of just 2.75% for this year, climbing back to 3.00% in 2014-2015.
- Unemployment – the nation’s uneven jobs market is set to see unemployment rates climb to 5.75% during 2012-2013, whilst wage growth is tipped to remain steady at 3.00% annual growth.
This year’s budget focuses on policies across most areas of the economy. Provisions are made for the NDIS and Gonski, and changes are made to a range of other areas from cigarette excise to unemployment benefits.
- Disability Care – the need to fund the much touted National Disability Insurance Scheme will result in a 0.5% increase in the Medicare Levy. This is intended to raise $20.4 billion, with the program set to be operational just before 2020. Funding for the NDIS will commence with $200 million allocated this financial year, before increasing to $6.7 billion in 2018-19.
- Education – Last night’s budget also confirmed government spending on the Gonski education reforms will increase to over $28 billion by fiscal 2022-2023, labelled the ‘National Plan for School Improvement’. As much as $600 million will be poured into the scheme next financial year, before peaking at $5.3 billion in 2022-23. The policy will also see $2.3 billion in university funding be redirected to schools.
- Cigarette Excise – Smokers will now pay even more for their cigarette fix, with prices now set to rise alongside the level of average wages (rather than inflation) from March next year. Based on historical data, this means a typical 25-pack of cigarettes will be 7 cents dearer next year.
- Senior Australians – Australia’s older ‘empty-nesters’ will also receive a $127 million trial package, aimed at those wishing to downsize homes they have owned for more than 25 years. If they take up the opportunity, they will have $200,000 of the sale price exempt from their aged pension calculations for the first 10 years. The negative for seniors is that this policy comes in conjunction with a new 15% tax on superannuation earnings for those receiving more than $100,000 per year.
- Welfare – One of the more major policies to come out of this year’s budget includes the cancellation of the popular $5,000 baby bonus, set to be replaced by payments through Family Tax Benefit A welfare expenditure from 2014. This will see expectant families receive $2,000 for their first child, and $1,000 for each subsequent child.
- Unemployment Benefits – those who cannot find a job may now earn an extra $19 per week before their welfare payments are reduced, with a threshold of $100 per fortnight. Workplace Minister Bill Shorten labelled the move as a ‘practical investment to give Australians…more incentive to stay in or re-enter the workforce’.
More on Taxation
The Federal Government plans to raise an extra $4.2 billion in taxation revenue over the next four years – mostly from banks, trusts and multinational corporations:
- Banks – financial institutions will be prevented from using low-tax offshore entities to reduce their tax bills across mobile sector activities, set to save the Government $320 million.
- Trusts – the 400,000 family discretionary trusts in Australia have been placed on notice of an ATO crackdown, expected to raise $380 million over the next four years as the body seeks hidden transactions, artificial reductions in income and underpayment of tax.
- Multinationals – the ATO will also receive $110 million to focus on companies which use offshore hubs to hold their intellectual property and marketing businesses, expected to reap the government as much as $577 million.
As usual, a budget is not a budget without mixed reactions – so what did major stakeholders think of this year’s economic plan?
- The Opposition – Shadow treasurer Joe Hockey has gone so far as to describe the budget as a ‘magic pudding’ completely detached from reality. The Opposition continue to have issues with the Government’s economic forecasting, insisting that they cannot be trusted. It should be noted however, that we will need to wait for the outcome of today’s reply to find out exactly what the Coalition thinks it could do better.
- The Greens – The Australian Greens have argued that this year’s budget fails to provide any ‘consistent values base or direction for the country’, according to leader Christine Milne, with continued calls for clawing back education cuts, blows to green initiatives and a failure to seriously ‘boost’ welfare.
- Business groups – The Business Council of Australia has accused the Government of losing industry’s confidence, with chief executive Jennifer Westacott commenting that business is ‘being asked to believe that the same approach…is somehow going to work this time’. A number of industry leaders have also suggested that the commercial sector has been left out of the Government’s thinking.
- Health groups – AMA president Steve Hambleton has contended that the Government will now force sick people to pay more for their health care, with another decision to defer indexation of the Medicare Benefits Schedule set to take as much as $664.3 million from primary health.
And so, that’s it for now – keep an eye out over the next few days as more opinions emerge!
How do you feel the budget affects you?