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For the government this “election budget” is an exercise in juggling. On the one hand, it is throwing out voter bait. On the other, it is running hard on the theme of economic responsibility. For the second budget in a row, there are highly generous tax cuts, amounting to A$158 billion over a decade. This is on top of the earlier $144 billion. The government wants this election to be all about tax. The tax cuts you will get, now and later. The “higher taxes” that Bill Shorten would impose – by cracking down on negative gearing and cash refunds for franking credits. And by claiming that Labor’s climate policy is a “carbon tax”. A theme in Treasurer Josh Frydenberg’s speech was that the government was taking its initiatives “all without increasing taxes”. Under the budget’s tax cuts, low- and middle-income earners would pocket up to $1,080 within weeks of the election – for families with a dual income, this amounts to $2,160. The government points out that its tax cuts are the most generous since John Howard’s time. But two things might be noted about this comparison. The 2007 tax package has since been much criticised for being irresponsible – and Howard did not win the election of that year. Despite earlier speculation, the Coalition won’t try to rush any of the tax package – which includes a reduction in the 32.5% rate to 30% from July 2024 – through parliament this week. The government wants to set up as much of a contrast between itself and Labor on tax as possible. Frydenberg told a news conference the tax bills were “a package” covering the immediate tax relief and the rate change. The government was asking the public “who do you trust?” to deliver lower taxes. Finance Minister Mathias […]

The bottom line will surge to a surplus next financial year on the back of higher than expected revenues from commodities, strong corporate profits and low unemployment. The estimated surplus of A$7.1 billion for 2019-20 will be the first time the budget has entered positive territory since 2007-08. How will the government spend this unexpected windfall of revenues? Simplifying the tax system will cost the government $158 billion over the next ten years. The measures include: doubling the low and middle income tax offset from $530 to up to $1,080 for people earning up to $126,000, starting from the current 2018-19 financial year changing the 32.5% threshold to be $45,001 to $120,000 from 2022-23, with the 19% bracket covering incomes from the tax-free threshold up to $45,000 reducing the 32.5% tax rate to 30% from 2024-25 onwards, and changing the income thresholds so that the 30% rate applies to all earners from $45,000 to $200,000 removal of the 37% rate altogether from 2024-25. Despite the boost in revenue the government expects to reach its long-term target of surplus being 1% of gross domestic product later than estimated in the December budget update. The government now expects surplus to exceed 1% of GDP in 2026-27. This budget, like many before it, predicts wages to increase over the next four years. The government expects the wage price index to increase from its current 2.1 to 3.5 by 2022-23. Net debt as a share of the economy is expected to peak in 2018-19 (19.2% of GDP), and will then commence a downward trend until fully eliminated in 2029-30. Government receipts are expected to climb from 24.2% of GDP in 2017-18 to 25% by 2022-23. Payments are expected to be 24.5% of GDP in 2022-23.