2019 Federal Budget
`With the Federal Budget brought forward by a month to make way for a Federal Election to be held in May 2019, politics trumps the tax policy worthiness and economics of this budget.
In 2013 I was trying to tap into community consciousness with a very pessimistic comment on social media, when I speculated we were heading into a “#DecadeOfDeficits”. A decade on since the GFC we have $370 billion of accumulated debt the government is now suggesting these deficits can be cleared over the next decade.
What, without another Telstra to sell at an inflated price like last time?
What do these deficits represent? Simply, overspending beyond the taxes collected, with the current generation of Australians borrowing against the future generation. The country living beyond its means and has precious little to show for it. Apart from, of course, largely wasted expenditure in education, school halls built in haste following the GFC many of which have now been torn down, roof insulation much of which has gone up in smoke, extreme overspending in the medical system and misdirected welfare expenditure. And sadly, this debt is likely to be understated with the NBN ‘off balance sheet’ and one day will find its way onto the debt tally.
With around 28 years of economic growth and no recession, even averted during the worldwide GFC, it is very difficult to justify the devastating hit to this nation’s finances in such a short period of time.
We now have to provide in the federal budget, to pay the interest on this massive debt. It is a good thing interest rates are low … at the moment.
Just as we start collecting more revenue faster than the politicians had planned to spend it, risking a surplus, we have a federal budget to snatch away any chance of a decent sized surplus.
Yet we are to believe our politicians – of any colour or persuasion – could average a $37 billion surplus in each of the next 10 years to clear us of the debt they have delivered to our children. It is evidently more important for the politicians to keep us in debt with their spending, bribing enough Australians to vote for them. Why give a cash handout to pay for high power bills, instead of the policies and politics of this country over the last 15 years which has delivered exponentially higher power prices?
Why do our politicians consistently provide government that increases the costs of living and lower real wages and a smaller per-capita economy which then needs a cash handout in the run up to an election?
Here’s a novel idea: since we are the ‘lucky country’, richly endowed with a natural competitive advantage with abundant resources that we once beneficially traded upon, again exploit our riches and provide homes and businesses with affordable power, grow our economy and real incomes. We may pat our backs for 28 years of economic growth, but how richer could our country be today had we not been so poorly governed for so much of the last 15 years?
Rather than a cash hand out today, to help some pay their ridiculously high electricity bill, should the last 15 years have instead kept power prices affordable, skipped accumulating a massive debt, provided real growth in the economy and incomes, and lower overall taxes?
The ‘surplus’ that has been forecast is about as slim as it could be. Net over the 2 years 2019 and 2020, it is a rather modest $2.9 billion ($7.1bn surplus in 2020, less the deficit of $4.9 billion still accruing for the current 2019 budget year). Tiny compared to our current $370 billion debt!
The budget trajectory over the next 10 years and possibility of clearing the debt looks bleak with $100bn of infrastructure spending foreshadowed (not including NBN), tweaking of rules allowing some flexibility to make superannuation contributions and the full ‘benefit’ of the “largest personal income tax cuts since the Howard Government”, don’t actually surface until – amazingly – the 2025 tax year.
Someone tell the Treasurer it is 2019. While there is some fiddling of the low and middle income tax offsets in the interim, the generous tax cuts are at least 2 elections and 5 annual federal budgets away.
Will the federal election ‘make Australia great again’? Or will self interest, narrow thinking, wasted money, higher taxes, more debt and excessive welfare continue to win instead?
Seeing through this politically noisy budget, clients of Tax Services Australia need to focus on their own position take this budget on board, brace for the imminent Federal Election, and continue to make decisions that support your personal situation, with the best advice and tax planning you can find.
Personal tax advice and planning to navigate you through the years will help position you to ride through the politics and keep more of your wealth after tax over time. For a tax professional focused and dedicated to take care of your taxation affairs, pop through a message to us today.
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