The budget surplus was the centrepiece of the 2019-2020 budget. The 2019-20 Budget is a pre-election budget. There is a focus on apprenticeships and education. The key messages are focusing on jobs and growth. Emphasis has been placed on delivering the ‘First surplus in 12 years’. Infrastructure is a centrepiece, with the government announcing an increase on the 2018 budget ‘record’ $75bn infrastructure investment bringing it up to $100bn. Aside from infrastructure, housing and the built environment more broadly, are barely mentioned. Read on for the full bespoke budget debrief exclusively for Institute members.
- Unemployment rates in a number of advanced economies are near record lows and there has been a pick-up in wage growth in the United States, euro area and Japan
- Australia is expected to continue to benefit from growth in major trading partners, with economies in the Asian region growing relatively strongly
- Uncertainties remain around trade tensions, emerging market debt vulnerabilities and geopolitical issues. Australia will continue to promote and benefit from free and open trade
- There is a budget surplus of $7.1 billion in 2019-20
- Total revenue for 2019-20 is expected to be $513.8 billion, an increase of 3.6 per cent on estimated revenue in 2018-19. Total expenses for 2019-20 are expected to be $500.9 billion, an increase of 2.8 per cent on estimated expenses in 2018-19
- The residential housing market has cooled, credit growth has eased and we are yet to see the full impact of flood and drought on the economy
- GDP growth is expected to pick up to 2¾ per cent in 2019-20
- There is a commitment to creating a further 1.25 million new jobs over the next five years
- The Government will keep taxes as a share of GDP within the 23.9 per cent cap.
- Immediate tax relief for low and middle income earners of up to $1,080 for singles or up to $2,160 for dual income families to ease the cost of living
- Lowering the 32.5 per cent rate to 30 per cent in 2024-25, ensuring a projected 94 per cent of taxpayers will face a marginal tax rate of no more than 30 per cent
- A further $158 billion of tax relief, building on an already legislated Personal Income Tax Plan.
- SMEs to get additional tax relief through company tax cut to 25 per cent+ access to $2bn finance fund
- Increase and expansion to instant-asset write off, up to $30,000 every time used and include businesses up to a turnover of $50m.
A new $525 million skills package (Vocational Education and Training)
- Create 80,000 apprenticeships
- Double incentive payments to employers (now $8k) + $2k payment to apprentices
- 10 new training hubs
- Further funding to increase participation of women and girls in STEM
- The government has committed to investing $17.7 billion in the university sector in 2019. This is projected to grow to more than $20 billion by 2024
- The budget provides for $93.7 million over four years from 2019 20 for scholarships for students to study at a regional campus of a university or vocational education training provider
Climate change and sustainability
- A $2 billion Climate Solutions Fund will boost agricultural productivity, support jobs for Indigenous communities and improve biodiversity and water quality, as well as reduce greenhouse gas emissions.
- The budget commits $79.2 million to help households, businesses and community groups lower their power bills by helping them better understand their energy consumption and invest in more energy efficient appliances.
- The budget provides $137 million for Practical Environment Restoration to support Australia’s natural environment. This includes a $100 million Environment Restoration Fund to help protect Australia’s threatened species, restore the coasts and waterways and take practical action on waste and recycling.
- A new National Electric Vehicle Strategy will ensure a planned and managed transition to new vehicle technology and infrastructure.
- The budget commits $284 million for a one off, income tax exempt payment of $75 for singles and $125 for couples to more than 3.9 million eligible social security payment recipients, assisting with their next power bill and cost of living expenses
- The Snowy 2.0 project has been provided with a $1.4 billion equity injection. The project will firm up intermittent renewable energy and provide storage which can meet the peak demand of up to 500,000 homes
The budget boosts infrastructure spending to $100bn over a decade (up from $75bn)
- This includes $23bn of new funding however much of this appears to remain unannounced (in preparation for the upcoming federal election campaign)
- Includes $6.5bn over the forward estimates and over 30 additional major projects
- Four-fold increase to the Urban Congestion Fund (announced in last year’s budget) from $1bn to $4bn (these predominantly appear to be road projects)
- Will include $500m commuter car park fund
- $2bn fast rail Melbourne to Geelong (previously announced)
– Includes $40 million (from last year’s budget) for detailed assessments of five fast rail corridors from Sydney to Wollongong, Sydney to Parkes (via Bathurst and Orange), Melbourne to Albury Wodonga, Melbourne to Traralgon, and Brisbane to the Gold Coast.
– These will complement the three presently underway that the Commonwealth has funded, which include Sydney to Newcastle, Melbourne to Greater Shepparton, and Brisbane to the Sunshine Coast
– A National Faster Rail Agency will be established to provide advice to the Government on fast rail, as well as to identify fast rail corridors and lead the development of business cases.
- $2.2bn road safety package
- Regional Australia will benefit from a new $220 million investment in improved internet and mobile services through the Stronger Regional Connectivity Package
- The Government is investing $100 million in Regional Airport infrastructure upgrades to improve airport safety and access
Given the imminent federal election, we will provide a comparison of the budget in reply speech by the opposition later this week.
Budget in reply
The ALP budget in reply speech given on Thursday 4 April 2019, outlined the following actions that they would take if elected in the forthcoming federal election.
- Support the Government’s tax cuts starting 1 July this year
- Eliminate income-splitting in discretionary trusts – without affecting our farmers
- End tax refunds for people who currently pay no income tax (dividend imputation)
- Reform negative gearing and capital gains
- Introduce a tax cut for every Australian small business, for 93 percent of all businesses
- Restore Sunday penalty rates
- Crack-down on wage theft and the abuse of labour hire where companies shift their permanent jobs onto labour hire jobs to cut their pay
- Support enterprise bargaining
- Lead a new push to pay equity for Australian women
- Establish an Advanced Manufacturing Future Fund to ensure auto-firms in South Australia and Victoria can adapt and modernise
- to defence manufacturing and local procurement
- to agriculture, science and research
- to tourism and renewable energy
- and to a better NBN
- Reverse the cuts to hospitals and create a $2.8 billion Better Hospitals Fund:
– Putting more beds in emergency departments and on wards
– Reduce waiting lists for elective surgery
– Upgrade emergency department facilities in the suburbs and the regions: including better security measures for staff and patients
- Provide new MRIs to 20 hospitals and imaging centres in the regions and outer suburbs and these machines will be covered by Medicare.
- Create a National Integrity Commission – a Federal ICAC – to improve accountability in politics and public life.
- Introduce national Redress for the survivors of child sexual abuse.
- Introduce new healing initiatives for the Stolen Generations and to reduce the shocking numbers of Aboriginal kids growing up away from country and culture.
- Create a special taskforce inside the Commonwealth Department of Public Prosecutions to follow through the work of the Banking Royal Commission.
Labor will target:
- 50 per cent renewables by 2030
- 45 per cent cut in emissions by 2030
- And zero net pollution by 2050.
- uncap university places – providing over 200,000 more university graduates
- for TAFE:
– renovate the campuses and rebuild workshops
– two out of every three as a minimum of training dollars to go to public TAFE
– invest in programs to help older workers re-train in later years
– cover all up-front fees of 100,000 TAFE places in high priority sectors
Labor will invest in:
- Cross River Rail in Brisbane
- Western Sydney rail line
- Improve the Bass Highway in Tassie
- Expand the Mitchell Freeway to cut congestion in WA
- Upgrades to the Bruce Highway in Queensland
In addition to reforms to negative gearing and capital gains tax, Labor will:
- Spend $6.6 billion to incentivise the construction of 250,000 new affordable homes over 10 years by providing 15-year subsidies of $8,500 per year to investors who build new houses – conditional on them being rented at 20 per cent below market rent.
- Increase penalties on foreign investors.
- Re-establish the National Housing Supply Council, ideally as a statutory body, to monitor performance and measure housing need based on key demographic trends, socio-economic and cultural factors.
- Re-establish an appropriate governance mechanism to facilitate coordination of homelessness and affordable housing policy, potentially within the Council of Australian Government structure.
- Have a dedicated Commonwealth Minister for Housing.
- Support the emergence of a new build-to-rent asset class by reducing the applicable Manged Investment Trust withholding tax rate to 15 per cent (down from 30) for rental housing.
The ALP has also previously supported the Government’s bond aggregator for social and community housing administered by the recently established National Housing Finance and Investment Corporation (NHFIC). NHFIC is likely to be retained (if potentially renamed) by an incoming Labor government.
There is also discussion of a second National Rental Affordability Scheme (NRAS), given that NRAS one grants have started to expire.