5 July 2020
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It's a beam us up, Scotty, Budget!

Peter Switzer
10 May 2017

By Peter Switzer 

I’ve tagged this Budget as the “Beam us up, Scotty” Budget, with the Treasurer trying to pull off an economic escape plan that just might be sellable to the Senate. After all, it’s no good having an economically brilliant Budget that gets turned into a zombie because the measures promised are nothing more than walking dead ideas because the crossbench Senators say No!

I admit being caught between Star Trek and Star Wars with this Budget, as the Treasurer looks to be going where no Treasurer has gone before, while he tries to deal with the Senate, which has been described as a motley crew reminiscent of the bar or cantina scene in Star Wars IV — A New Hope.

And isn’t “A New Hope” relevant for this Government, with its PM under polls pressure?

The main points of the Budget are:

  • The Deficit drops from $37.6 billion to $29.4 billion by next year.
  • A $7.4 billion surplus is expected by 2021 — that’s ScoMo’s current best guess.
  • The economy will grow by 2.75% in the financial year ahead. Queensland’s Cyclone Debbie has hurt the growth number.
  • The top five banks will cop a 0.06% levy, which will cost them $6.2 billion over four years and will hit their share prices, as it did yesterday before it was formerly announced! How did that leak get out? Banks’ share price slumps wiped $14 billion of their market caps yesterday.
  • The Medicare levy has been bumped up by 0.5% for all workers (but the lowest paid) but it kicks-in in July 2019.
  • The Trump idea of lower taxes was ignored, with the overall rise in taxation, over time, about $23 billion but the Treasurer calls it a “Senate tax” to get the cross bench Senators to pass the Budget.
  • There’s $75 billion in infrastructure spending over the next 10 years, which will help the economy grow and enhance its productivity.

Of course, there’s a range of measures that will affect some individuals harder than others, such as landlords claiming their trips to see their interstate or overseas properties as a tax deduction going. And getting a tax deduction for depreciation on fittings and furnishings in an investment property, which you haven’t actually bought and added to the property, will no longer be claimable!

On the other hand, if you earn $180,000 plus, the 2% deficit levy goes in July — many thought this could have been extended.

Meanwhile, the First Home Super Saver Scheme will allow entry-level buyers to save funds at a discounted tax rate by making additional contributions to their superannuation. First-home buyers will be allowed to use up to $30,000 of voluntary superannuation contributions to place a deposit on a house or apartment. So a would-be buyer can access his or her salary sacrifice contributions to raise a deposit.

All up, this doesn’t look like a Conservative Budget, with former Labor leader Kim Beasley, telling me last night that it looked like a “Labor Light” Budget!

So how come? It’s simple. This is an escape plan to get the Government out of the clutches of the crazy Senate. And despite the negative impact on the big five banks — CBA, NAB, ANZ, Westpac and Macquarie (and their related share prices), this is an up Budget. It has the potential to push economic growth, business investment, wages, inflation, interest rates and employment up. Sure, it will push Gross Government Debt to $663.8 billion by 2020 but it will take the deficit down, and into surplus by 2021, if all works out. And that’s a big “if”.

However, as we all know, Budgets are easier said than done.

One final word. This Budget not only has to pass the Senate test, it has to get past the debt ratings agencies. And the $23 billion tax slug and the good debt spending on infrastructure just might get them a pass, for now.

Well, that’s the new hope!

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