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FEDERAL BUDGET

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Revenue a focus of this year’s Federal Budget

By Rebecca Vassarotti 10 May 2017 22

This year’s Federal Budget speculation frenzy is at an end with the delivery of the Budget on Tuesday night by the Federal Treasurer, Scott Morrison.

Lots of early attention has been given to the new taxes contained in the budget. There will be an increase to the Medicare Levy – to fund the full implementation of the NDIS. This has been well received given the strong support for NDIS and recognition of the need to ensure it is appropriately funded into the future. A big levy on the Australian banks looks like being well received by the community while being criticised by bank advocates who are warning that this money is likely to hit customers and shareholders.

This budget has been sold as a big infrastructure budget and a number of jurisdictions are receiving significant support for infrastructure projects. Early information suggests that the ACT is not one of these with the one project that appears to be supported is planning for the Pialligo avenue duplication. Except in the area of housing affordability, there continues to be little funding for core social infrastructure that is needed for people when they are managing challenging circumstances.

In the weeks leading up to the budget, the Government reduced expectations around housing affordability measures that were originally being touted as a centrepiece of the budget. There are a couple of good initiatives to encourage private investment in affordable housing and to secure funding for homelessness services which are very welcome, particularly for Canberra-based homelessness services that have been dealing with years of funding uncertainty. There are concerns that some other initiatives such as the ability of first home owners to save for a deposit through their superannuation and tax breaks for people downsizing may in fact put upward pressure on housing prices if they are successful. As expected, the Government failed to act in the areas that will make the most difference to housing affordable housing – negative gearing and capital gains tax.

Some of the big initiatives around education have already been well ventilated including the Government’s embracing of needs-based funding for schools. In addition, changes to university funding and requirements for graduates to pay back HECS loan much more rapidly were already foreshadowed. Increased investment in schools funding based on need is welcome, but the budget measures for universities are likely to disadvantage young people into the future.

The most distressing element of this budget is the continued vilification and targeting of people needing to access income support without any clear evidence regarding the positive impact of harsh measures for either individuals or the community. This budget makes savings through introducing harsh penalties for people who do not meet mutual obligation requirements – including being locked out of receiving any income support for a month in some circumstances. There is talk about drug testing for some groups and denying disability support for people who may have caused their disability through drug abuse. Beyond creating the classes of ‘deserving’ and undeserving’ poor, it is hard to see how this will save the community money or be effective in enabling people to deal with substance abuse. These measures reflect a broader emerging trend where particular groups face greater vulnerability and little support to deal with the challenges that sometimes occur in life.

The glaring omission in this budget is any investment around climate change and supporting us to move to a carbon neutral future. Response to this real challenge continues to be delayed and will ultimate mean that it will be more expensive to deal with in future years. Thank goodness that the ACT Government has recognised the need to act and we have action at a local level in this area.

This budget like the one before it is being judged against the benchmark of the horror 2014 Budget. Early analysis suggests that this is a much better budget in that it recognises the need to deal with revenue rather than cutting services, and supports major investments in the areas of education and disability. There is more to do however, particularly in supporting social infrastructure and essential services to our community.

What do you think are the good and bad elements of the 2017-18 Federal Budget for Canberra?

2017-18 Federal Budget coverage:


Catchup on our LIVE coverage from Hotel Realm: Andrew Sykes from RSM Australia dissecting “The Rocky Horror Budget”. It was just a jump to the left for Malcolm Turnbull, but still a step to the right with continued attacks on public service pay growth and decentralisation. The impacts of the Budget for Canberra are in the detail – not the headlines.

Federal Budget 2017-18 – RSM overview.
Federal Budget 2017-18 – RSM pdf presentation.

What’s Your opinion?


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Revenue a focus of this year’s Federal Budget
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dungfungus 9:35 pm 16 May 17

Rebecca Vassarotti said :

dungfungus said :

Rebecca Vassarotti said :

dungfungus said :

Rebecca Vassarotti said :

dungfungus said :

Rebecca Vassarotti said :

Andrew Sykes said :

Interesting that this government started it’s term with saying that it was a spending problem, not a revenue problem. Now raising taxes………………

There have been a significant number of people saying for some time that there has been a revenue problem. I think what the gov has learned (hopefully) is that some of the programs that do require significant expenditure are actually investments (universal healthcare, education, an income safety net) that have broad support in the community.

And where is the money coming from to fund these “investments”?

What is your plan to repay the massive government debt?

Well I do have some ideas to start. Definitely start work by removing tax concessions on superannuation that have turned the scheme into a wealth creation vehicle rather than a way to save for retirement. Scrap capital gains tax and negative gearing (and do something about housing affordability while you are there). Get rid of the private health insurance rebate that has failed to take pressure off the public hospital system. That would go a fair way I reckon. If we are stil short, am very happy to pay more tax if means our young people get a good education, are able to leave university without thousands of dollars in debt, could access the healthcare they need when they needed it and had some prospect of being able to afford a home sometime in the future.

Those measures combined may return the budget to surplus but I am talking about the debt; you know the $600 billion plus.

Which superannuation concessions are you exactly referring to and why should you be concerned about students leaving university with a “big debt”. They signed up for it so they be happy to pay for it.

People can get healthcare if they need it by taking out private insurance. It’s a choice.

Re the debt, you are right, I was referring to the deficit / surplus which really is the measure on how we pay for the services we prioritize as a community. In relation to the debt, I am not an economist and take my lead from economic reporting – through this I understand Australia’s debt is still pretty low when compared to other countries and when we look at net debt rather than gross debt (which is a better measure) was running at around $300 billion at the beginning of the year. Given that we have maintained the AAA credit rating, the rating agencies seem to be saying it is manageable at this point. It is something that needs focus, but balancing revenue against expenditure is a key area to be looking at.

The superannuation tax concessions I am referring to are the ones that were originally looked at in the Henry Tax Review, and the finding that “the structure of the existing tax concessions is inequitable because high-income earners benefit much more from the superannuation tax concessions than low-income earners”. Given the cost of these is around $16 billion a year it is worthy of attention. While the Gov has done some work in this area there is alot more to do. There is a wide range of suggestions that were made in the Australian Council of Social Service submission prior to this budget that cover issues such as the preservation age for retirement and treatment of earnings post retirement. Info can be found at http://www.acoss.org.au/wp-content/uploads/2017/02/ACOSS_Budget-Priorities-Statement_2017-18-FINAL.pdf

Re university education, the days of free university education ended well before I went there. The question is what the level of fees should be on students and at what income level should they commence repayment. Is it reasonable for someone to leave university with debt of $75,000? There may be professions where there is the capacity to earn higher wages but surely we are all benefiting from a well-trained doctor and investment in university goes well beyond an individual benefit. With the intersection of these higher fees and the housing affordability crisis, it seems pretty rough to be a young person these days.

Regarding private healthcare insurance, yes I completely agree. It is a choice and I am not sure why we spend $3.5 billion a year to support people to make that choice. That money could be much better spent in the public healthcare system.

Our sovereign debt will soon exceed $600 billion and we are currently borrowing more money to service existing debt. That is akin to paying your home mortgage interest by charging it to your credit card which I am sure you would find stressful.
Add the contingent liability of the government’s guarantee on all deposits up to $250K and we have a possible debt of trillions of dollars.

I know what the narrative is from the economists and the credit rating agencies (the latter group are the ones that totally misjudged the world situation immediately before the GFC).

To accept that because our debt situation is not as worse as other counties is tantamount to looking the other way. I was heartened to hear yesterday the panel on Insiders starting to talk about this problem and perhaps what Nikkie Saava said was the most damning comment namely “most Australians don’t give a stuff about it”.

I believe the situation now is one where the government has to devise a plan to repay the debt whatever the cost to the community is. They should take this plan to an election and if it means they lose government that is more acceptable than doing nothing. It is better to retain control of our destiny in a situation like we are facing rather than do nothing and let our global creditors decide our fate.

Those who play chess or checkers may be familiar with the terminology Zugzwang which simply means that there is sometimes a situation in a game where one player must always make a move on his turn even if that if that move is to that player’s disadvantage.
Waiting or doing nothing is not an option and this applies in this situation.

The rest of the issues (unaffordable schemes like Gonski, NDIS & “free” tertiary education) are academic unless the debt problem is addressed.

Its a particularly fair point you make re the rating agencies and the gfc. What is your view regarding the ‘good debt / bad debt’ narrative?

That’s tantamount to saying “levy good – tax bad”. At the end of the day they are they same thing. Even the best-intention loans can end up as bad debts. Take HECS debts for example – currently about $60 billion and no one can estimate how much of that is recoverable.

When politicians decide what is good or bad for us it is time to head for the hills.

I meant to add opinion about your statement about Australia’s sovereign debt problem not being as bad as some other countries. There is a big difference of course and that is the ability of the other countries to trade out over time due to their export manufacturing infrastructure still being operational. Japan is an example. Australia manufacures very little now and it will be a lot less from now on so, unless there is another mining boom, we are truly stuffed.

Re the aggregate debt, Ken Henry spoke about it to Leigh Sales on ABC 7.30 tonight (not on i-view yet).
I would urge everyone who may now be a little concerned about what Australia is facing to watch what Mr Henry said. Very courageous too, considering his position with one of the big four banks. His comments about the GFC may turn some heads also.

chewy14 4:50 pm 16 May 17

Rebecca Vassarotti said :

chewy14 said :

Rebecca Vassarotti said :

chewy14 said :

Rebecca Vassarotti said :

dungfungus said :

Rebecca Vassarotti said :

Andrew Sykes said :

Interesting that this government started it’s term with saying that it was a spending problem, not a revenue problem. Now raising taxes………………

There have been a significant number of people saying for some time that there has been a revenue problem. I think what the gov has learned (hopefully) is that some of the programs that do require significant expenditure are actually investments (universal healthcare, education, an income safety net) that have broad support in the community.

And where is the money coming from to fund these “investments”?

What is your plan to repay the massive government debt?

Well I do have some ideas to start. Definitely start work by removing tax concessions on superannuation that have turned the scheme into a wealth creation vehicle rather than a way to save for retirement. Scrap capital gains tax and negative gearing (and do something about housing affordability while you are there). Get rid of the private health insurance rebate that has failed to take pressure off the public hospital system. That would go a fair way I reckon. If we are stil short, am very happy to pay more tax if means our young people get a good education, are able to leave university without thousands of dollars in debt, could access the healthcare they need when they needed it and had some prospect of being able to afford a home sometime in the future.

Scrap capital gains tax? Geez you’re generous. You mean the discount right?

But regardless, you do know that you’re free to pay more tax right now if you want to, send the government a cheque, I’m sure they’ll be happy to take it.

Oh, wait, when you say “You’re” happy to pay more tax, what you really mean is you’re happy for other people to pay more tax for the things that you want.

Carry on…….

Re Capital Gains Tax you are right – I mean the discount. Treasury estimates the current rules around the 50% discount for capital gains costs around $6billion each year, so even reducing this to 25% would be a good way to make some savings.

The things I want that I am prepared to pay more tax to achieve include a universal healthcare system that means that people can get the healthcare they need when they needed, rather than worrying if they can afford it. It includes a quality education system for all kids, that focuses on needs and potential, rather than how much their parents earn and includes the opportunity to go to university. It includes a community where people can afford to put a roof over their heads, get a job that is meaningful and provides a safety net if things go wrong. I am pretty sure that these wants are shared by a fair proportion of the population and are not my niche issues that I am asking others to contribute to.

I would agree wholeheartedly with your wants but I’m really struggling to see where we are actually letting you down then.

We have universal healthcare.

We have a needs based education system and everyone who is capable and wants to go to university can do so.

We could do better on affordable housing but this would rely on older generations giving up some of their windfall gain with regards to property and I can’t see that happening anytime soon although I’d be happy to see a political party try to do so in a holistic manner.

We have relatively low unemployment although we are still on the bottom end of the economic cycle and could improve.

We have a solid social security system and safety net where 35% of all government spending is in the area.

All in all, your wants are already well and truly catered for.

I think my point was that this is the first budget in some time that has committed significant funding to some of these programs through a range of mechanisms including a rise in the Medicare levy. Its a welcome departure from the approach taken in the 2014 budget.

OK so let’s go back to the original discussion about revenue Vs spending problems.

I raised the issue that we are already spending significantly above long term averages as a %GDP.

The programs you mention are either new or increased spending on certain areas. So what you’re asking for is not that revenue should be increased to match existing structural spending but rather that more revenue should be raised to fund new expanded spending areas and have bigger government as a whole. That current and future taxpayers should face an increased taxation burden than past generations.

Your point then isn’t about whether there is currently a spending or revenue problem with the budget, it’s that you want a fundamentally different type of government and spending levels than has existed in this country for at least the last 40-50 years.

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