Between the May budget and the actual outcome for the 2017-18 financial year less than two months later, “personal benefits expense”, read welfare spending, fell short of estimates by $345 million.
The actual spend on assistance to the aged was $80 million lower than forecast by Scott Morrison seven weeks earlier, assistance to veterans and dependents was $99 million lower, assistance to people with disabilities was $95 million lower, and student assistance was $101 million lower.
Contrary to the narrative about record job creation, assistance to the unemployed was $52 million higher than the Treasurer estimated. New jobs are barely keeping up with population increase.
Spending on unemployment benefits remains low in comparison to other welfare outlays at about one quarter of assistance to the aged, one third the assistance to families with children and less than one half of disability assistance.
Spending over the year on vocational and industry training was a paltry $25 million, which was $4 million less than quoted in the budget. It appears the states are bearing the brunt of retraining their workforces.
For those who are lucky enough to be employed, a recent paper by the Parliamentary Budget Office shows that the government is relying on people in the middle quintile, averaging $46,000 taxable income a year, to help them reach surplus.
“This group of taxpayers is projected to face an increase in their average tax rate of 3.2 percentage points by 2021–22, as a higher proportion of their income is taxed at the 32.5 per cent rate. Their average tax rate is expected to increase from 14.9 per cent to 18.2 per cent.”
A longer-term perspective shows that, for all but the lowest quintile, the increases in average tax rates since 2009–10 are offsetting reductions in average tax rates that occurred during the 2000s.
The reason that people in the lowest quintile are largely escaping the increasing impost is because most of their income remains below the effective tax-free threshold which Labor, under Julia Gillard, more than trebled from $6000 to $18,200.
In order to distract from his appalling judgement elsewhere, Malcolm Turnbull made a vague promise to think about maybe reducing income tax rates for some people some time or other.
This is going to be a very interesting discussion, if it ever happens, because, at the same time, Turnbull is increasing everyone’s taxes through an increased Medicare levy from 2% to 2.5%. Labor wants this to only apply to those on over $87,000.
Labor also wants to reimpose the 2% deficit levy on high-income earners meaning those on incomes of more than $180,000 would pay a 49.5% marginal tax rate.
Whilst increasing taxes for most individuals through the Medicare levy, Turnbull and Morrison want to slash company tax rates for big business by 5%. This will also result in higher personal income tax for investors because, the less the company pays, the less the franked dividends that domestic shareholders receive. Foreign shareholders will be the beneficiary of this change.
As the government tries to sell the idea that they are the party of lower taxes, it always amazes me that no-one mentions the GST which increased the price of almost everything by 10% and which is often mooted as increasing – something the Labor party also opposes. They also never mention the significant increase to the tax-free threshold under Labor which saved someone earning $18,200 pa $1,830 in tax.
Under the stewardship of the Coalition, net debt has risen from $161 billion in August 2013 to over $346 billion by the end of October 2017 without the excuse of a global financial crisis.
I have no problem with debt per se if it was being invested in productivity enhancing activities which improved our standard of living but committing to $400 billion capital expenditure on war toys over the next twenty years, on top of the already very generous and ever-increasing defence and national security budget, seems outrageous and not in keeping with economic strategy elsewhere. The idea that giving foreign armaments suppliers hundreds of billions of dollars will create jobs in Australia is akin to relying on Adani and their possible Chinese partners to solve our unemployment and energy supply situations.
Anyone looking for a cohesive strategy or long-term plan from this government would be sadly disappointed. We bounce from one ideological thought bubble or populist announceable to the next, none of them informed by thoughtful analysis, expert advice, credible modelling of alternatives or the future best interests of the nation..
Most, if not all, of this government’s ideas are to shore up their own power by appeasing their donors, an increasingly fractious Coalition partner, and an unrepresentative membership base.
Meanwhile, the country waits for a leader.
