Having been out of touch with the minutia of Australian fiscal policy throughout May, this commentator’s fresh set of eyes has focused on the federal budget only in the past week.
While at least it has not made the overall deficit and debt outlook worse — and we should perhaps be thankful for such small mercies in an election-eve budget — it contains much that disappoints.
The biggest disappointment is the failure to tackle budget repair more vigorously and through spending curbs. The projections show a roughly balanced budget by 2019-20, but this is a budget for 2016-17 — not 2019-20 — and in 2016-17 the deficit remains large.
Moreover, even the projected balance in four years’ time relies heavily on personal income tax bracket creep (which the budget does a little, but very little, to address) rather than spending curbs. Expenditure savings measures in this budget are timid.
Following the fierce response to the 2014 budget, Abbott/Hockey in the 2015 budget waved the white flag to the forces arrayed against further attempts at budget repair.
Turnbull/Morrison are continuing to wave the white flag in 2016. While boldness may have been an act of electoral suicide in the current context, at some stage a federal government will be forced to grasp the nettle of spending restraint.
What has attracted most attention is not the deficit and debt outlook but the proposed changes to company tax and superannuation.
A sizeable cut in the company tax rate is warranted and the budget initiative in that direction is welcome. However the ten year phase-in and back-loading of the cuts are problematic.
While there is nothing wrong in principle with a legislated multi-year path for tax reform, ten years strains credulity, particularly as the opposition promises to abandon the path at the first opportunity. No company contemplating an investment now can count on the phase-in being completed.
The surprisingly far-reaching changes to taxation of superannuation are a curate’s egg. Some of the changes are sensible, but others will hit either accumulated savings or the incentive to save in the future – this from the party that supposedly champions thrift and self-reliance. The new caps are mostly unwarranted and should at least be watered down.
The alternative government should draw no comfort from the above critique. Point-by-point, their proposals are worse.
Home > Commentary > Opinion > Despair of budget repair
Despair of budget repair
While at least it has not made the overall deficit and debt outlook worse — and we should perhaps be thankful for such small mercies in an election-eve budget — it contains much that disappoints.
The biggest disappointment is the failure to tackle budget repair more vigorously and through spending curbs. The projections show a roughly balanced budget by 2019-20, but this is a budget for 2016-17 — not 2019-20 — and in 2016-17 the deficit remains large.
Moreover, even the projected balance in four years’ time relies heavily on personal income tax bracket creep (which the budget does a little, but very little, to address) rather than spending curbs. Expenditure savings measures in this budget are timid.
Following the fierce response to the 2014 budget, Abbott/Hockey in the 2015 budget waved the white flag to the forces arrayed against further attempts at budget repair.
Turnbull/Morrison are continuing to wave the white flag in 2016. While boldness may have been an act of electoral suicide in the current context, at some stage a federal government will be forced to grasp the nettle of spending restraint.
What has attracted most attention is not the deficit and debt outlook but the proposed changes to company tax and superannuation.
A sizeable cut in the company tax rate is warranted and the budget initiative in that direction is welcome. However the ten year phase-in and back-loading of the cuts are problematic.
While there is nothing wrong in principle with a legislated multi-year path for tax reform, ten years strains credulity, particularly as the opposition promises to abandon the path at the first opportunity. No company contemplating an investment now can count on the phase-in being completed.
The surprisingly far-reaching changes to taxation of superannuation are a curate’s egg. Some of the changes are sensible, but others will hit either accumulated savings or the incentive to save in the future – this from the party that supposedly champions thrift and self-reliance. The new caps are mostly unwarranted and should at least be watered down.
The alternative government should draw no comfort from the above critique. Point-by-point, their proposals are worse.
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