by Alan Thornhill
The Federal Treasurer, Scott Morrison, insisted that he is taking Australians on “the safe road” to a balanced budget when he published his Mid Year Economic and Financial Outlook document today.
However he admitted that the nation will still face deficits of $37. 4billion in 2015-16, $33.7 billion in 2016-17, $23 billion in 2017-18, and $14.2b in 2018-19.
Mr Morrison said the journey to budget balance needed to be “safe and careful” with the expected date of a return to surplus pushed back another year to 2020-21.
Using the metaphor of the Christmas car trip, he said he expected a lot of Australians to ask “are we there yet?”.
“We need to take a safe and careful route and one (that) does not put at risk our jobs and growth,” he said.
The government has announced extra spending on its humanitarian program since its May budget.
Its decision to permanently accept an extra12,000 refugees from Syria and Iraq , in particular, will cost $158 million in 2015-16, and $909 million over four years to 2018-19.
Offsetting savings were announced in today’s mini budget.
These will include removing bulk-billing for pathology services and reducing bulk-billing for diagnostic imaging services and MRI services.
This will reduce spending by $197 million in 2016-17 and by $639 million over four years to 2018-19.
There will also be cuts to childcare.
These will include reducing the childcare subsidy for families earning more than $250,000 a year.
by Alan Thornhill
Speculation on tax reform has peaked ahead of a meeting between the Treasurer, Scott Morrison, and State premiers on Friday.
The Federal government has insisted, in the lead up to this meeting, that “everything will be on the table” as these talks progress.
Labor has responded by alleging that Malcolm Turnbull is secretly planning to increase the GST.
Opposition strategists know that an effective campaign on the GST will be their best chance of defeating the still popular Prime Minister, at the Federal elections expected next year.
Lingering divisions in the Liberal party – mostly flowing from the September coup in which Mr Turnbull replaced Tony Abbott as Prime Minister, might help.
Especially as Mr Abbott is finding it difficult to remain heroically silent, about his loss.
But Mr Turnbull knows, deep in his political heart, that his own scare campaign, on the carbon tax, is also the best card he has in his hand.
And – perhaps for that reason – he has been reluctant to say – flatly – that his government won’t increase the GST if it is re-elected next year.
There are several good reasons for not doing so.
After all, coalition governments don’t have a particularly good record, when it comes to keeping pre-election promises, particularly on tax.
Why draw attention to that?
Then there would be recalcitrant premiers to convince, if a Prime Minister did want to increase the GST.
Why give them time to organise, too?
Much better to keep mumbling about “everything being on the table” when it comes to tax reform.
There are risks, of course.
That was illustrated – all too well – today when Fairfax newspapers claimed to have a secret document showing not only that massive increases to the GST are likely, but that the Medicare Levy could rise as well.
There is an old game, in politics, called “frightening the horses.”
And our politicians – on all sides – are quite good at it.
by Alan Thornhill
There has been a big improvement in Australia’s current account, but governments are still spending more than they raise and home building approvals are down.
These developments are all confirmed in figures the Bureau of Statistics published today.
The Bureau noted that the nation’s September quarter current account deficit – of $18.1 billion – was $2.4 billion smaller than that seen in the previous quarter.
It said that, in seasonally adjusted chain volume terms – the surplus on goods and services, increased by $6.1 billion from that chalked up for the June quarter.
Significantly, the Bureau said “this is expected to contribute 1.5 per centage points to growth in the September quarter 2015 volume measure of GDP.”
But the picture in the building industry, which has been one of the bright spots in the economy, was less encouraging.
The Bureau said private sector house approvals fell in October.
It recorded a fall of 0.6 per cent in the month and said that – in trend terms – approvals have now fallen for seven months.
The Bureau also noted that – despite all their talk of austerity and deficit reductions – Australia’s politicians – overall – are still spending more than they raise.
It said taxation revenue fell by 14.7 per cent, in the September quarter, to $101.3 billion.
However total expenses, for all levels of government, had risen by 0.1 per cent – in that time, to $149.8 billion.
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by Alan Thornhill
Some might call it a mini-budget.
All the Prime Minister said, in an interview with Leigh Sales on the ABC last night, though, is that his government would release “an innovation statement” within the next two weeks.
Well, perhaps he did add a little dressing, to make the prospect enticing.
By promising, for example, that he would would “set out a very large number of substantial measures. to drive the innovation that would ensure that Australians, their children and grandchildren, will have great jobs.”
“…better jobs in the future that will drive our economy,” he added.
Then he laid it on the line.
“I don’t think anybody has any doubt that if we are to remain the high wage, generous social welfare net country, first world country that we want to be then we need to be more innovative, more competitive, more productive and the innovation statement will be a good example of the measures the government is undertaking to achieve that.”
Yet Mr Turnbull, himself, has some catching up to do in this regard.
He saddled Australia with the pursuit of an internet system which, even if achieved, would offer speeds be well below those of many other first world countries, such as France.
Of course, with its vast expanses to connect, Australia does have difficult – and expensive – problems to overcome, in building anything that could – even remotely – be called a fast internet system.
Yet the picture emerging from Mr Turnbull’s attempt to do so – on the cheap – has not been impressive, so far.
Long waits for connection.
There can be no doubt about one thing.
This “innovation statement, when it appears, will be drawn up to underwrite Mr Turnbull’s bid for re-election next year.
Politically, his situation has its difficulties, despite what some are calling his initial “honeymoon” period.
He is still the man who became Prime Minister, without a popular mandate.
And he is not short of opponents who stand ready to remind him of that fact, if he starts making mistakes, as most Prime Ministers do, as they start to settle into office.
Mr Turnbull also declared during his interview last night that he is “comfortable” in his new job.
But make no mistake.
His handling of the Brough affair is already being watched very closely.
by Alan Thornhill
Industry has welcomed the Federal government’s broad acceptance of the recommendations of the Murray Committee’s review of Australia’s financial system.
Kate Carnell, Chief Executive officer of the Australian Chamber of Commerce and Industry said the reforms it recommends would strengthen growth and jobs.
“The set of balanced reforms announced today will help deliver a stronger, more competitive and resilient financial system to underpin greater business investment and personal retirement savings,” Ms Carnell said.
She said business could be seen as the engine room of the economy and the financial system as its fuel pump.
“And we need to keep it finely tuned for the best performance,” she added.
”The government has set out a clear plan for strengthening the resilience and effectiveness of Australia’s financial system to help underpin stronger business growth and job creation.
“We welcome progress on long awaited proposals and urge the Parliament to support this important reform agenda, including ensuring robust capital adequacy for banks,” Ms Carnell said.
“The Australian Chamber noted earlier this year that merchant service fees were the largest component of bank fee growth for the second year in a row.
“This highlights the importance of action to improve regulation of banking fees,”she added.
We are pleased to see Treasurer Scott Morrison’s statement that future credit card surcharging will need to pass a type of ‘fair dinkum test’ and urge the government to extend similar reforms to bank interchange fees.”
“Business welcomes the Government’s intention to secure crowd sourced equity funding legislation through the Parliament by the end of 2015.
“This will give greater scope to widen its focus to crowd sourced debt funding, which done correctly would also be very positive for small business growth and start-ups.”
John Osborn, the Chamber’s Director of Economics & Industry Policy, said: “A more open and competitive superannuation system with greater choice for employers and employees will foster innovation and deliver better value for businesses and consumers.
“The current default superannuation fund rules are outdated and not in keeping with the demands of a modern and competitive finance industry. This includes forcing default fund selection though a Fair Work Commission process and the treatment of employees covered by agreements,” he added.
“Currently, an employee who is subject to an enterprise agreement cannot redirect contributions to a personally nominated fund. It no longer seems appropriate or necessary to supress personal choice and we cannot ignore the broader competition implications of limiting the ability of people to vote with their feet.”
“We welcome the government’s commitment for the Productivity Commission to examine this issue more closely. Super funds already require approval by the Australian Prudential Regulation Authority – the body with the expertise to assess product suitability – and whatever comes from the Productivity Commission’s process must keep duplication to an absolute minimum.”
“We continue to support the proposal that requires superannuation fund trustee boards to have a minimum of one-third independent directors – including an independent chair – and believe this strikes the right balance for superannuation governance,” Mr Osborn concluded.
by Alan Thornhill
The party’s over.
Unions, employers and community groups have had a long, hard look at the risky economic circumstances Australia now faces, as the mining investment boom fades.
That was evident, above all, at the economic mini-summit Malcolm Turnbull called in Canberra yesterday.
All present accepted that the path of consensus and innovation that the new Prime Minister is suggesting might be worth trying, after all.
That spirit, faintly evident in the days leading up to the meeting, strengthened during the three hours the participants spent in the Cabinet room, assessing their options.
The results won’t be immediate, or dramatic.
Tax reform is back on the table.
Employers will be less vocal, in their campaign for cuts to Sunday penalty rates.
But how do the participants, themselves, see what has happened?
Some tax concessions which favour the rich – and sometimes distort markets – are to be reviewed.
Jennifer Westacott, the Chief Executive of the Business Council of Australia said: “there was a very, very strong agreement that concessions needed to be looked at.”
A statement that would once have raised eyebrows.
But she didn’t stop there.
“I think the more important discussion we’ve had today though is what is the nature of work … and how you get a collaborative framework for lifting productivity and opportunity,” Ms Westacott added.
The ACTU, secretary Dave Oliver revealed the summit had been his first meeting with an Australian Prime Minister since the last Federal elections.
And the ACTU President, Ged Kearney, described it as “absolutely a step forward.”
The three hour meeting, itself, was of course just the first step in what is likely to be a long process of hard bargaining.
But,with positive assessments like these emerging from it, there is now a real chance that the same spirit will take hold in the broader community.
And that would be a very big achievement, indeed.
by Alan Thornhill
Chris Bowen says tax reform is needed to promote economic growth.
Addressing the Australian Financial Review’s Tax Reform Summit in Sydney, the Shadow Treasurer said Australians have just seen five quarters of declining living standards.
“Barring the GFC, this is the first time this has occurred since records began,” he said.
Monetary policy was no longer as effective in boosting growth as it had been.
And Australia could no longer rely on its terms of trade for that purpose.
So other paths, such as tax reform, had to be tried.
Explaining the problem, as he saw it, Mr Bowen said:” Australia’s growth rate averaged 3.5 per cent between 1992 and 2008.”
“ It reached 5 per cent in 1999.
“And now, growth is running at just 2 per cent, not enough to see unemployment come down.
He said :”sometimes people ask: “Is the age of reform over?”
They ask:“Has the 24 hour media cycle and the rise of social media killed it?”
“Has the fact that no working person today under 40 has lived through a recession meant that reform is just too hard?”
My answer is: “We can’t afford to let the age of reform be over.”
But Mr Bowen said tax reform is never easy.
Agreeing on the need for reform is relatively easy.
“ Agreeing on what that reform should look like, however, is the harder part.
“Unquestionably though, tax reform must be part of that reform process.
“It helps to be clear about the problem.
“Too many taxes.
“Too much collected by inefficient taxes.
“A not always coherent distribution of responsibilities between the levels of government.
“But let us also be very clear about what the solution is not.
“More regressive taxes.
A tax system which takes us backwards on inequality instead of making our society fairer.”
“I believe there is a sensible discussion to be had about tax reform,” Mr Bowen said.
I believe the Australian people understand that that sensible discussion will not involve every individual being better off.
“But people rightly expect that every tax change which primarily affects higher income earners shouldn’t be automatically ruled out while the tax debate inevitably and continually gets dragged backed to taxes which predominantly hit low and middle income earners.”
“So Labor is happy to participate in the tax reform discussion.
“In fact, objectively we have been leading it,” Mr Bowen said.
by Alan Thornhill
The rich have been getting richer.
And the news, for the rest of us is pretty much as expected.
The Bureau of Statistics reported today that the average income of high income households rose by 7 per cent between 2011-12 and 2013-14, to $2,037 per week.
But Rita Scholl from the ABS said that not all households have experienced the same improvement in economic well being.
“Today’s results show that low income households have experienced an increase of around 3 per cent in average weekly household income, while middle income households changed little since 2011-12.”
Ms Scholl said the average income of all Australian households had risen to $998 per week in 2013–14.
But average wealth had remained relatively stable at $809,900.
Ms Scholl said, though, that change in average wealth had been uneven across different types of households.
For example, the average wealth of renting households was approximately $183,000 in 2013-14.
Rising house prices contributed to an increase in the average wealth for home owners with a mortgage ($857,900) and without a mortgage (almost $1.4 million).
She said too, that, most Australian households continue to have debts in 2013-14.
Over 70 per cent of households were servicing some form of debt.
These included mortgages, car loans, student loans or credit cards.
For example, the average credit card debt for all households was $2,700, Ms Scholl said.
And some had big debt burdens.
“One quarter of households with debt had a total debt of three or more times their annualised disposable income” Ms Scholl said.
“These households are considered to be at higher risk of experiencing economic hardship if they were to experience a financial shock, such as a sudden reduction in their income or if interest rates were to rise, increasing their mortgage or loan repayments,” she added.
Ms Scholl also said the Bureau’s survey also allow comparisons of income and wealth across different types of households.
“In 2013–14, couple families with dependent children had an average household income of $1,011 per week, which was similar to the average for all households at $998 per week.”
“By comparison, after adjusting for household characteristics, one parent families with dependent children had an average household income of $687 per week,” Ms Scholl said.
Weathercoast by Alan Thornhill
A novel on the murder of seven young Anglican Christian Brothers in the Solomon Islands.
Available now on the iTunes store.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
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