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What Australia’s Leaders Are Saying About #Budget2016

By Women For Media | May 4th, 2016

Nicki Hutley, Chief Economist, Urbis

“This budget is a case of fiscal groundhog day. We are seeing the Government move the pieces on the chess board but not actually make significant inroads into the budget deficit.”

“There’s nothing in here that inspires a vision that is going to fundamentally change the Australian economy for the better.” ABC News

“There’s very little here to get excited about. The economic predictions are ridiculously optimistic. We live in an uncertain world and you have to build on conservative forecasts. …as Australians we have to ask, what is it we want from policy and then how are we going to pay for it, because we can’t have increased expenditure and reduced taxes.” World Today, ABC Radio

Andrea Staines, Non Executive Director, QIC, Transport for NSW, SeaLink

“The government’s plan to encourage asset recycling is on the right track with its focus on proper cost benefit analysis for new projects. It was also terrific to see the scope of the program expanded from roads to also include public transport.” Sydney Morning Herald

Professor Miranda Stewart, Director, Tax and Transfer Policy Institute, Australian National University

On the income tax cut for earners over $80,000: “It’s basically a tax cut that benefits the top 20% of female taxpayers and top 35% of male taxpayers by taxable income.”

“If the government was serious about addressing real tax disincentives to work it would have looked at the high effective marginal tax rates facing many women.” News.com.au

Su-Lin Ong, Head of Australian Economics, RBC Capital

“An improvement in the budget trajectory remains the central forecast but the underlying budget remains firmly in the red.” Sydney Morning Herald

Romilly Madew, CEO, Green Building Council of Australia

“We are pleased to see a renewed national focus on Australian cities, with more than $3.4 billion allocated to urban rail projects. Only then will Australian taxpayers know they’ve invested in infrastructure that is resilient and that delivers the best value for decades to come.”

“It is disappointing that the budget announces no new funding to assist Australia to reach its international commitments for emissions reductions and to transition to a low-carbon economy.”

“The built environment represents significant opportunities for emissions reductions at relatively low cost, but there are no new incentives or support for the property and construction industry, or any other industry for that matter, to make the most of these opportunities.”

“…investment in urban forests is important, but we’d like to see the development of a national green infrastructure policy that goes further than being just about trees, and include boosting biodiversity, enhancing the public domain and building more resilient cities.” The Fifth Estate

Pauline Vamos, CEO, Association of Superannuation Funds of Australia

“We do not support the reduction of annual concessional caps to $25,000.”

“While today less than two per cent of people with superannuation make contributions above $25,000, a significant number of such individuals that have low balances are attempting to catch up. For instance, around 36,000 women with balances less than $200,000 in 2013/14, were making contributions in excess of $25,000.” SMSF Adviser

Belinda Robinson, CEO, Universities Australia

On cuts to the Higher Education Participation and Partnerships Programme (HEPPP): “Cutting such a program means we could be denying talented students a chance at higher education just because of their background. That is not only unfair but it robs Australia of future highly skilled graduates and innovators.”

“To build the highly skilled contemporary workforce of the future Australia needs all Australians – regardless of their background – to have the opportunity to gain the skills required by employers.”

“Improving equity in higher education is not only fair, but an essential platform for building the diverse, skilled workforce of the future.” Guardian Australia

Catherine Robson, CEO, Affinity Private

“There were some welcome incentives, such as the Low Income Superannuation Tax Offset (replacing Labor’s Low Income Super Contribution) and the ability to effectively average concessional contributions over five years, which will assist the self-employed with lumpy incomes and those in the early stages of their career.

However, the reality is that those who have periods out of the paid workforce, or work in low-paid or not-for-profit industries, will continue to find accumulating retirement savings challenging. These people are at a much higher risk of ending their working lives without the security and dignity of independence.” Canberra Times

Dana Fleming, Tax Partner, KPMG

“We strongly support the Government’s measures to allow those with broken work records, often women, to make top-up payments. This is a very fair and important move which will go some way to ensuring those individuals have a decent retirement package.”

“Retaining the Low Income Super Contribution for low earners and allowing tax deductions for all contributions into superannuation are also welcome.” ABC Radio

“Paring back some current concessions – bringing down the 30 per cent tax threshold from $300,000 to $250,000 seems to strike a reasonable balance between equity and incentives for people to fund their own retirement.” Sydney Morning Herald


Retailers to reap the benefits from Budget’s tax break for small businesses

By Sydney Morning Herald | May 13th, 2015

Retailers are set for a sales rush in the wake of a generous tax break for small businesses that will encourage spending on everything from office supplies and computers to fencing and cars.

Diane Smith-Gander, a non-executive director at Wesfarmers which includes Coles supermarkets, Bunnings and Officeworks in its stable, said the measure would likely lead to a “bump” in sales for many retailers.

But to have longer-term economic benefits the money would need to be spent on productive assets that allowed businesses to grow and employ more people.

“You don’t want the small business equivalent of the flat screen TV phenomenon,” said Ms Smith-Gander, who is also chairman of Transfield and president of Chief Executive Women.

“I think this is a bit more generous than people were expecting.”

Ms Smith-Gander said that the budget’s other key focal points – on encouraging greater workforce participation – would only have longer term benefits for the economy if there were also more jobs created.

Segments within retail that could benefit from the measure included car retailers and office supplies, she said, and its impact was likely to appear in business confidence surveys.

Wesfarmers owns some of the country’s largest retailers including, Coles, Target, Kmart, Bunnings, and Officeworks.

While some businesses would be able to fund the purchases from their cash flow, there may also be an increase in demand for bank credit, she said.

“There will be some small business loans, and the banking industry will have to respond quickly.”

“It’s truly amazing,” said Robbie Sefton, who runs a communications consultancy and has just finished a three year term on the Reserve Bank of Australia’s small business advisory board.

“This will definitely create opportunities for people to upgrade that phone system, upgrade software or replace daggy office chairs, it will definitely make a difference.”

Ms Sefton said the measures would have a psychological impact.

“It is a really powerful message about saying ‘don’t give up’,” she said.

Ms Sefton said small businesses would look to grasp the detail of the opportunity which made the explanation of it important.

“If it is packaged up in a way that is simple and communicated well to their accountants they will, they rely on their accountant to give them advice particularly tax advice,” she said.

ANU institute of tax and transfer policy’s Miranda Stewart said the package was very similar to that rolled out as part of the Rudd government’s stimulus efforts in the global financial crisis although, crucially, this package was more generous with a $20,000 cap compared to a $5000 cap in Labor’s version.

She said there was empirical evidence that such programs would stimulate spending.

At the same time there was still an “open debate” about whether that spending was simply the bringing forward to investment that would have happened in future years and now would not, she said.

This article was originally published at the Sydney Morning Herald and was written by Mathew Dunckley and Clancy Yeates.


Is Australia spending over $100 million a day more than collected in revenue?

By Professor Miranda Stewart | February 16th, 2015

“At the moment, we are spending over $100 million a day more than we’re collecting in revenue. Now that’s unsustainable, particularly given we’re spending nearly $40 million a day on the interest on the debt that we have.” – Treasurer Joe Hockey, interview with Alison Carabine on RN Breakfast, February 3, 2015.

Mr Hockey has made similar statements in multiple interviews to support the government’s position that cuts to spending are needed to reduce the deficit.

To get $100 million of “overspending” a day, the Treasurer has relied on the Commonwealth Government fiscal balance recorded in the Mid Year Economic and Fiscal Outlook statement (MYEFO). The MYEFO, released in December mid-way through our financial year, updates the figures from the May Budget – including the deficit.

MYEFO states that the 2014-15 estimated deficit is $40.362 billion. It’s listed in MYEFO as the underlying cash balance.

The estimated deficit is a net fiscal balance for the entire year, so it does not really make sense to think about it on a daily basis. But ignoring that quibble for now, the numbers in Mr Hockey’s statement more or less check out.

In fact, dividing $40.362 billion by 365 and rounding produces a figure of $111 million – even more than the $100 million a day that the Treasurer stated.

That’s up from the estimate of the annual fiscal deficit of $29.8 billion – $80 million a day in the Treasurer’s language – that was in the May Budget.

MYEFO also tells us that the expected 2014/15 deficit, or underlying cash balance, is 2.5% of GDP.

The interest of $40 million a day also comes from MYEFO. It’s a figure for the interest on Commonwealth government-issued debt, listed in table D7 of that document as $14.2 billion. Divide that by 365 and you get $39 million: Mr Hockey’s “nearly $40 million a day”.

Let’s put it in context: with a population of 23,742,527 as I write, each Australian is “overspending” by $4.66 per day, or just over $1,700 per year. And we’re each paying $1.64 in interest a day on our debt.

What do the numbers mean?

Internationally, we are doing OK. In 2012, the latest year with full comparable figures, all OECD members except for Norway and Germany had an operating fiscal deficit and most of them had a larger deficit than Australia.

What about government debt? This is difficult because there are different measures, including net or gross debt, central or general government debt, or the value of Commonwealth-issued securities.

In 2012, Australia’s gross general government debt (at all levels) was 57% of GDP as recorded by the OECD here. But at the Commonwealth level, the May budget indicated that government debt on issue would have a face value of 23.3% of GDP, while Commonwealth net debt is estimated as 15.2% of GDP in Table 3.4 in MYEFO.

Most other governments had higher gross debt than Australia. Some governments, like Germany, had a fiscal surplus but high debt (89% of GDP in 2012). The UK had debt of 101% of GDP and a deficit of 6% in 2012.

The Commonwealth government is AAA rated. It does not have any problem borrowing.

As the deficit and debt trend up, the credit rating agencies have started to mutter. The agencies, like Moody’s, rely on the value of issued government securities – on this basis, Moody’s states that “consolidated gross general government debt, which includes state and local government debt, is about 32% of GDP, whereas the median for AAA-rated countries is around 45% of GDP”.

On any comparative measure of government debt, we are still ahead of the curve.

How can we fix it?

We don’t need to worry too much, not right now. Partly because, as others have recently explained, the government budget is not like your household budget.

However, both the Parliamentary Budget Office and the Grattan Institute argue that our fiscal deficit and government debt are structural and need fixing in the medium to long term.

To do that, the government can either cut spending or raise taxes.

Commonwealth government taxes this year are estimated to be $353.6 billion (total revenue is $385.9 billion) but government expenses are over $400 billion. More or less, that is what causes our “overspend”.

Today, our federal taxes are falling. They were estimated at $360 billion in the May budget for 2014-15, or 22.1% of GDP.

This is lower than a decade ago: under the Howard government, federal receipts reached 24% of GDP. And tax revenues are predicted to decline further in MYEFO, by several billions, because of lower commodity prices and because your wages are not growing as fast as before. The GST raises only a small percentage of GDP in revenue and revenue growth is slowing.

In the May 2014-15 budget, the government proposed to cut expenditures including unemployment benefits and the age pension, and raise fees for doctors and universities. The government claims that $10.6 billion in budget savings have not been enacted because of the Senate’s refusal to pass these unpopular budget measures.

We could collect more taxes, if we choose, to fund public goods, redistribution and services.

Verdict

It is true we are spending over $100 million a day more than we’re collecting in revenue and nearly $40 million a day on the interest on the debt. However, we compare favourably to other countries on deficit and debt.

You don’t need to worry too much right now about your $4.66 a day in “overspend”. But you do need to join a debate about tax reform that asks what you want government to do, how we can reform taxes to ensure prosperity, and how we can fund public goods fairly and sustainably for the future.

This article was originally published at The Conversation.

Photo Credit: Ryan Rayburn/IMF

Sectors: Government