Key Takeaways From the 2018-19 Federal Budget10/05/18
This past Tuesday, the Treasurer the Hon. Scott Morrison handed down the Federal Budget for the coming financial year. With Australia going through one of the least volatile, and most prosperous economic decades, many Australian families, businesses and workers were all expecting relief and support in protecting their respective interests. For those who don’t care enough to read the whole thing, or simply don’t understand what the implications of the budget are, here are some key points that will be relevant to most students and young professionals in the economics and finance sectors.
The Australian economy is in its 27th year of consecutive growth. That is quite a feat considering the various economic conditions and events endured between then and now. The prosperity and support for business at all levels is at the highest it has been since the GFC, and the flow on effect from this continues to guarantee the future of the Australian economy. Backed by these economic conditions, businesses have been able to take on more workers (most importantly young people), and back the abilities of an Australian workforce.
Australia has just over 2.1 million registered businesses. With a working age (25-64) population of around 12.5 million, and an unemployment rate of 5.5% as at January 2018, if around one in every three businesses hired one more employee, Australia’s unemployment would be zero. Understandably, it isn’t that simple. Nevertheless, by supporting businesses to grow, workers can equally prosper and be given a hand up rather than a handout. Having delivered around 1000 more jobs every day on average over the past year, the backing of major road, rail, vital infrastructure, exports and small business via this budget is likely to provide more of the same in the best case scenario.
The Government has planned to remove a full tax bracket by 2024, capping income tax at 32.5% for workers earning between $37 000 and $200 000 (around 94% of the workforce). This means that middle income earners will get approximately $530, or $10 a week and have more access to the money that they are earning. By making corporations more accountable for their tax obligations, cracking down on black market economies, and limiting Government spending growth to a mere 1.6%, the budget delivers a self-sufficient plan that can benefit ordinary workers via the rebate.
Craft breweries and distilleries will no longer have to pay an additional tax in order to compete with the big players in the industry. The backing of small businesses via an increase to the amount they can claim back on their excise, with the increase from $30 000 to $100 000 by mid-2019. With the continuation of the $20 000 instant asset write-off for small businesses applying to craft breweries as well, this assistance proves to be very beneficial overall to brewers.
Additionally, extending the draught beer concessions to include the smaller kegs (8kg or heavier, previously 48kg or heavier) which craft breweries just about exclusively use to distribute their product is another big boost. Further, the threshold to access these benefits has been increased to all businesses turning over less than $10 000 000. Subsequently, the well known and loved niche booze makers, all 380 of them in the country, will likely pass down these benefits to the consumer.
Naturally, there were also criticisms of the budget, with many using social media to voice their disappointment and asking the Government to “keep my $10” in order to fund various other initiatives. A wafer-thin surplus in the coming financial year, and the promise of a surplus equivalent to 1% of GDP in seven years’ time is one of the more favourable budgets of recent times, considering the position Australia – and indeed the world – was in a decade ago.
The lack of funding to programs like Newstart – an income support program for unemployed workers looking to re-enter the workforce. The rebuttal to this, naturally from the Government’s perspective, comes from the backing of businesses to allow them to grow and enable them to employ more workers and making Newstart somewhat redundant.
The Government’s plan to increase income from illicit tobacco products is being criticised, as the $2.2bn overall surplus comes partly from a $4.5bn increase in expected tobacco tax income. A recent KPMG report showed that the Government loses around $4bn in tax income via illicit tobacco. With an increase in tobacco taxes considered, the Government would then require around $3.3bn of the $4bn to be payable to make the maths add up. Naturally then, a large crackdown is needed to stop smokers buying illegal tobacco, and instead purchasing approved products and paying the tax accordingly.
Another criticism which was not picked up by many, was the fact that the Government is looking to cut costs by limiting access to welfare to migrants until they have remained in Australia for four years. An honourable mention goes to UNSW political analyst Nicholas Reece, who suggested on Sky News in the post budget discussion that this lack of access to welfare only increases the social divide between the Australian people and migrants, and will result in an increase in crime. The fact that an assumption is made that people of migrant backgrounds will turn to crime without access to welfare may be deeply offensive to some, and simply untrue.
Only time will tell how much of this plan for prosperity will gain bipartisan support, but the Treasurer has made it clear that there is no room for cafeteria legislation, in that the plan comes pre-packaged and there can be no picking and choosing between various implementations. The Shadow Treasurer was quick to dampen any hope of cooperation, saying that policies such as the tax cuts to the highest earners is not something that will be backed by the Opposition. Now it is simply a waiting game, to see what the country’s leaders actually have in store for the people in the coming year.