Federal Treasurer, the Hon. Joe Hockey MP, delivered the Coalition's first budget revealing the deficit will fall from $49.9 billion to $29.8 billion in the 2014 financial year. In the 2017-18 year, the debt is expected to fall to $2.8 billion, assuming the government passes all the legislative requirements for the budget.
The new Abbott government will be focussing on debt and deficit at the cost of substantial cuts in fiscal outlays, rising taxation through fuel indexation, and the deficit levy. As the Treasurer quotes, "That age of entitlement is over," but there will be significant electoral repercussion for the Coalition with the cuts that have been foreshadowed in the welfare, health and education arena.
While there is considerable virtue in the budget, reminiscent of the first Howard/Costello budget introduced in 1996, there will be significant headwinds from a hostile Senate and potentially hostile States. The decision to remove $80 billion in forward estimates going to the states will be a lightning rod for discontent by State Premiers and Treasurers, as they try to balance their own budgetary positions.
In recent days, Premiers across the Commonwealth (with the exception of WA) have stepped up their opposition to the significant cuts that the Federal Government has made in the areas of health and education in future years.
Whilst there are many benefits for Australia with the increased infrastructure spend and the incentive to recycle state assets, the issue mentioned above will provide some tension in Commonwealth/State relations.
The new Senate composition in July 1 will bring considerable challenges to the Government, as it will need to negotiate through a series of combinations with the Opposition, the Greens, Palmer United and the Independents to have any chance of getting some of these legislative reforms through the Parliament.
Please see below some highlights from Tuesday's budget:
• From 1 July 2015
o Previous bulk-billed patients will contribute $7 towards the cost of standard GP consultations and out-of-hospital pathology and imaging services.
o Concessional patients will contribute $7 for the first 10 services each calendar year.
o General patients will pay an extra $5 towards the coast of each Pharmaceutical Benefits Scheme prescription with concession cardholders paying an extra $0.80.
• Savings from health expenditure reforms in this budget will be invested in a new, capital-protected, Medical Research Future Fund until it reaches $20 billion.
For more information on the Government plan for the Health sector click here.
• Graduates will begin to repay their HELP debt when they start earning over $50,638 (reduced from $53,345) from 1 July 2016.
• The interest rate applied to HELP loans will be changed from an interest rate equivalent to the inflation rate to an interest rate that broadly reflects the cost of Government borrowings, with a maximum rate of 6 per cent.
• For the first time, the Commonwealth will provide direct financial support to all students studying higher education diplomas, advanced diplomas and associate degree courses, as well as those studying bachelor degrees, at all approved higher education institutions.
• Universities will be able to set their own tuition fees for the courses they offer.
For more information on the Government plan for Education click here.
• A core element of the Government's Economic Action Strategy is the Commitment of an additional $11.6 billion in the Budget for the Infrastructure Growth Package.
o The Growth Package delivers:
$5 billion for the Asset Recycling initiative.
$3.7 billion to boost infrastructure investments to expedite projects.
$2.9 billion for the Western Sydney Infrastructure Plan.
o This package will bring the Commonwealth's total investment in infrastructure to $50 billion through to 2019-20.
For more information on the Government plan for Infrastructure click here.
• The Government will invest $2.55 billion over ten years to establish the Emissions Reduction Fund from 1 July 2014. The Fund will support the purchase of low-cost abatement through reverse auctions to achieve emissions reductions and deliver benefits to landholders and businesses.
• The Government has committed to create a 'Green Army' – a 15,000 strong workforce – and planting 20 million native trees to re-establish green corridors while contributing to emissions reductions.
• Establishment of the Reef 2050 plan, which will include the establishment of a $40 million Reef Trust to provide a long-term strategic approach to address key threats to the Great Barrier Reef.
• The Government will provide $9.3 million over four years ($3.5 million in 2014-15, $3.3 million in 2015-16, $2.4 million in 2016-17 and $0.1 million in 2017-18) to improve the environmental health of targeted urban and peri-urban coastal waterways.
• The Government will provide $1 billion over four years ($291.3 million in 2014-15, $261.3 million in 2015-16, $244.1 million in 2016-17 and $231.4 million in 2017-18) to establish the National Landcare Programme. The new programme will merge Caring for our Country and Landcare to create a single National Landcare Programme.
• Age pension qualifying age to be lifted to 70 by 2035.
• The Government will achieve savings of $52.5 million over four years by limiting the number of times that volunteer job seekers can access Jobs Services Australia (JSA) to one occasion.
• The Government will provide an additional $100 million over four years to fund research in partnership with Rural Research and Development Corporations (RDCs).
• The Government will provide $320 million over four years as part of a package of measures to support farmers affected by drought.
• The underlying cash deficit is estimated to be $29.8 billion in 2014-15. The fiscal deficit is estimated to be $25.9 billion.
• Total revenue for 2014-15 is expected to be $391.3 billion, an increase of 4.6% on estimated revenue in 2013-14.
• Total Expenses for 2014-15 are expected to be $414.8 billion, a decrease of 0.1 per cent on estimated expenses in 2013-14.
For more information including the 2014-15 Budget Paper please click here.