Daniel Elkington

Tuesday, 9 May 2017

Budget 2017 - A Gamechanger

This is the budget where Turnbull may turn things around. A budget where the government makes up for the cruelty, dithering and empty slogans from the last three, a budget where the government finally acts as though there's a revenue problem by doing something about it, a genuinely surprising budget that is the best I have ever seen from a Liberal government.

It's not all good though. I've mentioned before that you really can't rate a government well if they're not doing anything serious to address the most pressing issue of our time - Climate Change - and it's really hard to find anything in this budget about it. I tried, I really did. On page 94 of Budget Paper Number 2 there's a reference to giving $0.6 million in 2017/18 for "online platforms that inform decision makers seeking to adapt to changes in climate", and page 95 says there's $13.4 million over 5 years for "an online data platform which links existing and new energy use datasets", whatever that is. That's all I could find. If you find anything else new regarding Climate Change put it in the comments, but in 2017, that's a disgrace.

But onto what the government is actually doing. After Peter Costello spent years giving away unaffordable tax cuts at the upper end (which Labor stupidly continued), damaging the budget bottom line and making it more difficult to fund good social policies, the government has stopped trying to solve this problem by hitting the poor and instead is starting to raise taxes to fund the shortfall. The tax policy is not perfect by any means - the "Temporary Budget Repair Levy" which was essentially an income tax increase on the very wealthy should have been made a permanent part of the tax schedules (instead it's being abolished as planned). The large cut to company tax should also have been scrapped, however on the plus side only the part of it assisting smaller businesses has passed Parliament, while legislation to cut it for very large companies making huge profits is unlikely to ever be implemented.

Instead, there's that huge bank levy, which was desperately needed. When the gap between the rich and the poor is widening like it is, and the big banks are making billions in profits at the expense of their customers, it makes sense for them to pay their way a bit more with the extra funds helping the vulnerable.

Then there's the 0.5% increase in the Medicare levy. Yes, it could have perhaps been made more progressive in its implementation, but it isn't applied to the very poor, and it means that the National Disability Insurance Scheme appears to be guaranteed. It's easy to forget about the real positive impact the NDIS has on people, and knowing that its funding appears to be secure may really help the people it affects to worry less about their future. I almost fell off my chair when I saw that there's also a bit of money to help reduce homelessness, something desperately needed but not expected at all.

We already knew about the changes to school funding, but it's worth emphasising that the government is seeking to genuinely allocate funding according to school need, as opposed to the well intended but flawed implementation from the previous Labor government that gave varying amounts to different states based on special deals and continued to overfund some private schools well in excess of what they should have been getting. If a private school gets a funding cut or a slowdown in its funding growth because it's getting much more than it deserves compared with public schools, so be it. Yes, Labor is complaining about the headline funding amount - if they want to increase the total funding while keeping its distribution genuinely needs based, good on them.

While some are complaining, the changes to University funding arrangements don't bother me too much. The overall funding cut to Universities is very small (especially compared with what the government had tried to do previously), and changes to fees and HECs only affect how students pay back their degrees later; with no upfront course fee payments, there shouldn't be anything that financially prevents poor students attending University in the first place.

There are some rather obvious nasties that aren't too much of a surprise. The measure with the biggest impact is of course the predictable freezing of the Foreign Aid budget, which will only hurt the world's poorest. There are various "welfare crackdown" measures that seem designed to satisfy the cries of tabloid newspapers rather than solve any real problem; things like trials of drug testing, and a demerit point system for welfare recipients. There is more money for defence, again, a solution looking for a problem, and the government is continuing to ignore one to the biggest things it could do to influence housing affordability - a big crackdown on Negative Gearing.

It is at least recognising that housing affordability is a problem though, and the announced measures may go some way to help. Ultimately if you want to get house prices down (or at least reduce the rate of price increase) you should implement policies that decrease demand, increase supply, or both. What we have is a bit of a mixed bag. A tax on unoccupied dwellings and allowing elderly to put money from house sales into super may increase supply. Restricting foreign ownership for new developments may decrease demand. But the centrepiece of the package - allowing people to put money into their super so it gets taxed less and allowing them to later withdraw it for a first-home deposit, if taken up, will only increase demand and hence put upward pressure on house prices. This might not be too much of a bad thing though if it gives first home buyers an advantage over investors; we'll see.

There's a lot of money for new infrastructure, and for once it's not all about new roads (which don't make sense when we should be discouraging the use of cars). The biggest surprise here was a $10 billion rail program. There isn't much detail about what this is actually for at the moment - projects will first need to have approved business cases. I wouldn't be surprised if we start to hear more about individual projects closer to the election. The Herald Sun immediately began to speculate about the possibility of it being used for a rail link to the Melbourne Airport.

And finally, the government ditched their "zombie" measures, nasties that have been hanging around for years that the Senate didn't support; things that were cruel and unfair. Things like cuts to family payments, increasing the Newstart eligibility age, and introducing waiting periods before unemployment benefits could be received. In essence, instead of hitting the poor to pay for health and education, we're now hitting the wealthy in the form of higher taxes on banks and middle to higher income Australians. The government should be going out and selling this, but instead their messaging seems to be that they would have preferred the former and were only forced into the latter due to the Senate. Nevermind the rhetoric though, they've overwhelmingly done the right and fair thing. Finding the money to fix schools and help the disabled from those who can most afford it. That's my kind of Australia.

1 comment:

  1. Awesome as always. Can't wait for next update.

    ReplyDelete

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