Key points
- The government will deliver Australia’s first surplus in 12 years
- Tax offsets for low and middle-income earners doubled to up to $1,080 a year
- Christmas Island detention centre to close by July, four months after it was reopened
- A clampdown on welfare to save $2.1 billion over four years
- Refugee support services take $77.9 million hit
The Coalition government is banking on a generous income tax package and a massive infrastructure cash splash to turn around its electoral fortunes.
Handing down his first budget just weeks out from a May election, Treasurer Josh Frydenberg has set up a contest with Labor on tax policy, announcing $158 billion in additional tax cuts.
More than 4.4 million low and middle-income earners will receive $1,080 when they submit their tax return for the 2018-19 financial year - more than double the tax offset announced last year.
Those earning between $48,000 and $90,000 will get the full amount, while taxpayers earning up to $125,000 will receive a reduced amount.
Mr Frydenberg said it was the largest personal income tax cut since the Howard government.
“This is money that could go towards your monthly mortgage payment, your quarterly power bill or your yearly car insurance,” Mr Frydenberg said.
Longer term, the government also wants to flatten tax breaks and reduce the amount of tax paid by those earning up to $200,000, to 30 per cent.
'Back in the black'
Declaring Australia is “back in the black”, Mr Frydenberg was keen to emphasise the budget had been brought back into surplus for the first time in 12 years without increasing taxes.
The government is projecting a $7.1 billion surplus for 2019-20 and promising to pay off net debt by 2030.
But the treasurer warned of challenges ahead including a contraction in international growth and a seven per cent forecast downturn in the housing market.
In the meantime though, the government is splashing the cash.
Pre-election sweeteners
The budget is packed with pre-federal election sweeteners thanks in part to a revenue spike from better than expected commodity prices.
Among the biggest beneficiaries are apprentices, small businesses, commuters and those in regional areas.
A $525 million skills package will increase incentives for apprenticeships and their employers is a bid to create 80,000 new apprenticeships.
The instant asset write-off will also be increased from $25,000 to $30,000 and extended to small businesses with an annual turnover of $50 million.
A $100 billion 10-year infrastructure package will target regional areas and quadruple spending on urban “congestion busting” projects.
Combined with the reduction in the annual migration intake from 190,000 to 160,000, the infrastructure package is a key plank of its population strategy.
A $500 million commuter car park fund is designed to encourage motorists to drive to public transport hubs and leave their cars behind.
Mr Frydenberg said the government planned to “focus on immediate, practical measures to cut travel times within our cities”.
After what has been described as the “angriest” summer on record in Australia, the government has set up a new $3.9 billion Emergency Response Fund to deal with future natural disasters.
There’s also $453 million to enable 350,000 children to receive 15 hours of preschool education.
Welfare crackdown
The government is hoping to reap $2.1 billion in savings on welfare payments through a new automated income reporting system.
From July 2020, the social services department will rely on payroll information supplied to the Australian Tax Office, rather than welfare recipients self-reporting income.
The department estimates that that will prevent $650 million in overpayments to recipients of Newstart and other benefits in the 2020-21 financial year, rising to more than $700 million the next year.
While there’s no change to eligibility criteria or entitlements, welfare recipients are no doubt wary of any automated scheme designed to deliver such savings after the robodebt debacle.
Calls from the welfare sector for an increase in the Newstart payment have also been ignored.
Refugees and migrants
Refugee services will also take a hit under the few savings measures in the budget.
Newly arrived refugees will need to wait one year instead of six months until they access Centrelink’s Jobactive program, saving the government $77.9 million over four years.
While the program will be voluntary before then, an estimated 3,200 refugees each year are now expected to not use the program.
But the budget also allocated $64.2 million for new social cohesion measures, to “increase support for migrants to become established and integrated in their communities”.
