May 09, 2018

Horse 2410 - Federal Budget 2018 - Yawn

Last night the Appropriation Bill No.1 2018 was presented to the House Of Representatives by Treasurer Scott Morrison. Like the handing down of every Coalition budget since they took office in 2013, this one started off with the Treasurer looking back to the global financial crisis of 2008 and announcing that they were going to fix the mess left behind by Labor. I don't know at what point you can no longer morally blame the previous government for your worries but the Turnbull Government appears to be well on track for doing this for at least the near future.
Mr Morrison then went on to extol the virtues of what the government have achieved, such as a million jobs having been created in the past twelve months and the restoration of the AAA credit rating.

He then outlined a five point plan for the budget as though this was a PowerPoint presentation but without the projector.
- there will be tax relief
- the government will back investment
- it will guarantee services (except one, see below)
- the borders will become more safe and secure
- the government will live within its means
These things are almost cliched to the point of flaggelating a deceased equine and sound like they could have come from a high school civics class. The real meat of the budget began immediately as if it was a jump cut; with no transition at all.

For 2018/19 the budget would remain in deficit to the tune of $14.5bn, returning to surplus in 2020/21 with a projected $11bn, and while these numbers sound absurd, government expenditure still continues to fall to only 24.7% of GDP and tax collected to 23.9% of GDP. What this says to me on principle is that just as the then Treasurer Wayne Swan said in 2012, budgets in Australia are self correcting in the long term, so the calls from the other side (who are now the government) that there was a budget emergency, were then and continue to be proven now, to be not just nonsense but one that has been completed - so a complete nonsense.

In the light of this, I thought that what was to follow was nothing short of barbarian. Having established that the budget was self correcting, Mr Morrison then announced a series of fiddles with the income tax table which does virtually nothing for the vast majority of people but benefits the top 10% of incomes.
Mostly the brackets remain unchanged, with the lower 32.5% rate being shifted from $37,000 to $41,000, with the 37% bracket being pushed from $87,000 to $90,000 for 2018/19 and eventually being shoved all the way out to $120,000 by 2024/25. The top 45% bracket will be pushed from $180,000 to $200,000.
I find the gall of this astonishing because it assumes that future governments will be held to these changes for as many as three election cycles. When this budget itself might very well be the last before the next election¹, this is both presumptuous and rude.

When this was announced, Opposition Leader Bill Shorten looked as though he had swallowed a wasp, Shadow Treasurer Chris Bowen made a face as though someone had farted, Tanya Plibersek looked as though she was prepared to walk across the table in the middle of the chamber and punch Mr Morrison in the face, and while Prime Minister Malcolm Turnbull was doing his best to look serious, Christopher Pyne was grinning like the Cheshire Cat.

There were some annoucements about the amounts that pensioners were allowed to earn before their benefits were affected, with an increase to that limit of $1300. The amount that someone's family could earn before it affected someone's Youth Allowance payments was pushed out by $10,000. The small business write off for assets under $20,000 will continue; which will certainly make many of my clients less anxious.

Then came the announcements for government initiatives which are always designed to illicit cheers from various members of the government's back benches.
- $500m for medical research
- $2.4bn for information technology and space exploration
- $75bn over ten years for road and rail infrastructure
- $1bn for an urban traffic congestion control plan
- The Australian Financial Complaints Office to open on November 1
- $1.6bn for in-home aged care
- $83m for mental health services for the elderly
- $24.5bn for schools (though given that public schools are the responsibility of the states, all of this is earmarked to give to private schools)
- $1.4bn to include more drugs on the Pharmaceutical Benefits Scheme
- $1.6bn for better Veterans Health outcomes (after almost a decade of yelling by both the DVA and organisations like Legacy and the RSL Association)
- $294m for National Security (but nobody to know what that means)²

The $2.4bn for information technology and space exploration sounds to me like a comprehensive plan to upgrade some of the oldest computer systems in the country (I'm assuming that they'll be at both the ATO and the Department of Finance) but space³ exploration? I can only guess that this means that we'll be building a launch facility which will be rented out to other space agencies because $2.4bn buys you practically nothing in the way of front line space hardware.

What wasn't announced in Mr Morrison's speech but was ablaze on Twitter less than 10 seconds after the media blackout was lifted, was that there will be an $83m budget cut for the ABC over three years. The budget couches this by saying that the ABC is exempt from the efficiency dividends which are to be imposed on the rest of the government but gives no indication as to how the corporation is supposed to cope with the budget cuts. Sir Keith Murdoch's 86 year war on the ABC continues unabated.

My overall impression of this budget is that virtually nothing changes except that this is about tax cuts. It makes no attempt to reform the tax system as touted before the budget was handed down, it makes no structural attempts to improve the bottom line, and it moves eventually to a simplified two-tier tax bracket system which was suggested by the Henry tax review back in 2010.

Ho hum. Roll over. Yawn and crick.

¹Assuming that the House and Senate election is held together, the latest possible polling date for a double dissolution election is Saturday 4 May 2019. Budget night would be May 9th.
There must be a Senate election before the next term begins on July 1, 2019 but if they are decoupled, then the House election can be held as late as Nov 2 2019.

² Though I'm guessing that it will go to the Department of Immigration and Border Protection so that Mr Dutton can invent even more efficient ways of being cruel to asylum seekers.

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