9 May 2017
In delivering his second budget, Treasurer Scott Morrison has embraced more positive language in the hope more positive numbers will follow.
Australia is expected to benefit from improvement in global economic conditions with an increase in Chinese GDP growth contributing to projections for Australia to achieve a steady 3 per cent growth figure by 2018-19.
While the projected GDP growth figures are encouraging, we have some concerns that these may prove to be overly optimistic.
We're concerned we may be falling back on our ‘lucky country’ mentality and hoping that world growth will be sufficient to see us through.
Further, there are still underlying structural issues in our economy that have not been effectively addressed in this budget.
For example, Treasury has revised GST collections down by $2.5 billion to 2019-20, owing to a number of factors, including weaker than expected collections and lower nominal consumption.
Consumption patterns are changing, Australians are getting older and we still have an over reliance on individual and company income tax collections.
Ultimately the government will need to revisit whether the current tax mix will provide the tax revenues essential to deliver on the services Australians have come to need and expect.
The government’s commitment to investing in much needed infrastructure is welcome and in some cases long overdue.
In addition to the direct benefits that will be gained from the development and building of the projects, there will be continued flow-on effects that will underpin the economic strength of many of our regional communities.
We are particularly pleased to see investments in the Melbourne to Brisbane Inland Rail project which will improve access to markets and provide export opportunities for agriculture and other commodities.
Our successes in securing various FTAs over recent years must be supported by good infrastructure that will actually support getting our products to market in an efficient and cost effective manner.
Negative gearing and capital gains tax
There are tens of thousands of Australians who have invested in property as part of their overall retirement savings strategy. They will be relieved to see the government has not disrupted these plans by making inappropriate changes to negative gearing or the capital gains tax treatment of property.
We have long said that there is no single silver bullet to the complex issue of housing affordability and we welcome the government’s recognition of this in the announcements made in the budget.
It is pleasing to see that the measures proposed seek to address the supply side of the equation and specifically include incentives for state governments that may help Australians seeking to access the housing market.
There are a raft of interrelated measures addressing housing affordability, including allowing older Australians to contribute downsizing proceeds into superannuation and the first home super saver scheme among many others.
Taken together, these measures are a solid attempt to address the issue of housing affordability.
Encouraging Small Business
The Government’s decision to extend the instant asset write-off for another 12 months is a good one but we would prefer to see it as a permanent feature in the system.
Small businesses employ 5.6 million Australians and contribute $380 billion to the economy. Given we all acknowledge how important small businesses are to the growth and health of the overall economy, we would have liked to have seen more in the budget specifically targeted at supporting small business.
For example, last week the government released a report from the Productivity Commission that recommended it should consider the feasibility of a simpler entity for small business that would combine features of existing structures.
It is disappointing that the government has ruled this out.
We would also like to have seen measures to encourage small business to embrace the digital economy.
We know from the CPA Australia Asia Pacific Small Business Survey that small businesses using social media, selling online, innovating and exporting are significantly more likely to be growing and creating jobs than those who do not.
Yet Australian small businesses are significantly less likely to be undertaking these drivers of growth than small businesses from Asia. For example, only 9 per cent of Australian small businesses expect to grow their e-commerce presence in the next 12 months as opposed to the Asian average of 43 per cent.
Measures to support small business to take up the opportunities of the digital economy would have a positive overall impact on economic growth.
Medicare Guarantee Fund
The proposed Medicare Guarantee Fund is a good initiative as for the first time Australians will have a better understanding of how health care actually impacts the bottom line.
Given the ageing tsunami we are facing, it has never been more important to have a handle on our health costs. In 40 years’ time approximately 40,000 Australians will be more than 100 years old. This will have a significant impact on the demands of the health system.
Many members of the Australian public think the Medicare levy meets the costs of Medicare and the PBS. In fact it is far from it. Not only will Medicare levy revenue now be earmarked for health instead of going into general revenue, the government's additional top up payments to this fund will make it clear what the cost of health to government budgets actually is.
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