Ok. A thousand words on the 2018 budget. There’s a lot of opinion, and a lot of numbers, but at the heart of the matter are two competing visions for the future of Australia, and how we pay for them. So here’s a quick and dirty guide to the 2018 budget.
(I’ve also refrained from linking manically throughout this article to my sources, just because much of my reading repeats the summation here. There’s a bunch of helpful resources below that provide full detail on anything I mention here.)
Tax, tax, tax
So the real headline-grabber is tax cuts and a pretty big change to the tax system overall.
The government has a seven year plan that it’ll knock out over three stages.
- Starting from July 1, 2018 the government will go easier on low and middle income earners. At the end of the next financial year (June 2019), you’ll get $530 back if you’re earning $125,000 a year. That number goes down as you earn less. Plus, they’re fiddling with a tax bracket. If you earn up to $90,000 a year, you’ll remain at a tax rate of 32.5%. Previously you’d knock up to the next stage if you earned $87,000.
- Around 2022/2023, they’ll do some more fiddles. At the bottom end, they’ll raise a 19% tax from $37,000 to $40,000. They’ll also take that $90,000 bracket from 2018/2019 and raise it again to $120,000.
- Then, in 2024/2025, they’ll do some additional fiddling and knock out a tax bracket completely. The end result is that people earning between $40,000 and $200,000 will pay the same tax rate: 32.5%. That’s around 94% of Australians.
The big question is: how much do all of these changes cost the government? They will lose a chunk of change by giving back more money to taxpayers. So where are they getting that money from?
The first phase of the plan will cost $13.4 billion. Labor are on board with this part of the plan – but they’re not on board with the rest of it. The government insists it’s all or nothing. (We’ll see how that shakes out in Parliament.) Labor want a full cost of these changes over the seven years – but the government can’t provide that. The government are only prepared to say that it’ll cost around $140 billion over a decade. Anything more specific is unreliable. Labor cries hoax.
This hasn’t stopped the Labor Party also issuing their own rebuttal policies. They want to effectively double the tax cuts. They say they can afford to do this because they’re not copying the tax cuts that the government wants to give to big business. The government has stayed behind their policies on corporate tax cuts for major businesses, even in the wake of the Royal Commission’s disastrous findings into the big banks. With Labor wanting to ditch those policies, they can afford to double the tax cuts for low and middle income earners. Labor has cited a report that 60% of the government’s tax cuts will end up benefitting the top 20% of income earners in Australia.
How the government can afford to give you a tax cut
The governments finding a lot of spare change behind the back of their couch. In addition they’ll:
- Move more people with disabilities off the pension and into work ($4.5 billion over four years);
- Crackdown on illegal tobacco importing, which is apparently a big deal (who knew?) ($3.6 billion over four years);
- Cut back on visa programs for overseas doctors and increase incentives to use lower-cost generic medicines (Over $700 million);
- Cut funding out of the Australian Securities and Investments commission ($256 million over four years);
- Freeze funding on the ABC, which equates to a cut of $83 million;
- They’re doing a bunch of things to welfare, including:
- Making refugees wait twice as long for unemployment benefits, 26 weeks instead of 13 ($68 million over four years);
- New migrants will wait an extra year (from three to four) for welfare benefits ($202 million);
- The controversial robo-debt system that famously incorrectly billed many Aussies from Centrelink will remain, and pair with data matching from the ATO, to apparently further bring in $299 million from people not paying their Centrelink debts;
- Further restrictions to unemployment benefits ($1.2 billion)
The government has not raised the Newstart Allowance (unemployment benefit), despite many experts saying it needs to be raised from the current $39 a day.
The government is going shopping
In addition to the tax cuts, the government is wanting to spend more money on:
- Adding new drugs to the Pharmaceutical Benefits Scheme – the thing that makes medications affordable for most Aussies (that’ll cost $748 million);
- Security screenings at airports will go up ($787 million);
- Improving remote indigenous housing in the Northern Territory ($440 million);
- Extending the national school chaplaincy program, a controversial program designed to provide pastoral care and support services into schools ($247 million);
- Pensioners will now be able to earn up to $7800 a year without it affecting their pension;
- Pensioners are also up for 14,000 new high-level home care packages and 13,500 residential aged care places.
Other, one off high cost expenses include a controversial $48.7 million towards a series of events and exhibitions to mark the 250th anniversary of Captain James Cook’s voyage to Australia.
As a side note, it’s been revealed the citizenship mess has cost taxpayers $11.6 million so far.
What the other mob says
The Greens want to:
- Raise Newstart Allowance by a total of $75 a week (an extra ten bucks a day);
- Tax reform that would mean all earnings over $300,000 would be taxed at a minimum of 35%, regardless of deductions;
- More money towards the Australian Tax Office to go towards multinational corporation tax avoidance.
The Greens are critical of the Government’s budget lack of response to climate change, and it’s relative cruelty to refugees and migrants.
Labor wants to:
- Fund 100,000 fee-free TAFE places;
- Restore funding to hospitals and universities;
- Spend $25 million to tackle corporate crime;
- Fund 500,000 more eligible MRI machines.
A short note on craft beer
Anthony Albanese, a Labor frontbencher, is possibly more popular than Bill Shorten. ‘Albo’, as he’s known, has long campaigned for an end to the tax on Aussie craft brewers that has them taxed 40% more than large-scale companies for using smaller kegs. Albo’s become a hero of the industry. The government got in front of this surge of popularity, and has ditched the tax.
The bottom line
No matter what, you’re most likely getting a tax cut.
Word is that this budget was designed for Turnbull to win the next election. All eyes are on the tax plan, and getting it through Parliament. A fair chunk of that may come down to the Senate cross-bench.
We’ll update you as the situation develops.
Where you can go for more
- The ABC has a host of user-friendly resources, including this cheater’s guide, and this guide to the big numbers, and this one on how everything is being spent.
- Watch a break-down of the budget, an interview with the Treasurer and a panel break it all down on this week’s Insiders.
- Find a summary of Labor’s plan here plus links to all of The Guardian‘s coverage.
- Malcolm Turnbull talks to Sabra Lane on ABC’s AM, defending the government’s budget (and talking about the breaking news on by-elections).
- The Saturday Paper provides a full summary as well as this interesting piece on wage stagnation – a fair chunk of the government’s calculations rest of the idea that Australian’s wages will rise, but that may not happen.
Photo at the top thanks to Guardian Media Services.
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