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The Coalition Government’s fourth Budget, and the first of its second term, promises a return to surplus in the 2020-21 financial year.  If this is achieved it will be the nation’s first surplus since the final Budget of the Howard/Costello years, ending a 13-year run of deficits.

  However, the Government has shown the white flag on its previous efforts to achieve a surplus by reducing spending and living within its means.  Instead, it has taken the high-taxing, high-spending path that is politically more saleable.

As a result, last night’s Budget will raise $23 billion in new taxes, including a 0.06 levy on the liabilities of major banks, which is predicted to raise $6.2 billion over the next four years.  The Government also announced a 25 per cent increase in the Medicare levy – from 2.0 per cent of taxable income to 2.5 per cent.  This will take force in mid-2019, and has been earmarked to support the previously unfunded cost of the National Disability Insurance Scheme.

The increased tax revenue will see government spending grow to 25.4 per cent of GDP in 2018-19.  The Government relies on the increased revenue and projected GPD growth of 2.75 per cent next financial year, and 3.0 per cent in 2018-19, to underpin its bid to get back into the black.


The highlights


  • The unemployment rate is projected to decline steadily from 5.75 per cent next financial year to 5.25 per cent by 2020-21.
  • Stricter “mutual obligation” requirements on job seekers, including the loss of benefits for failure to comply.


  • The Government has extended for another year the allowance for small businesses (with aggregated turnover below $10 million) to immediately deduct eligible assets costing below $20,000.
  • $101.5 million over five years from 2016-17 to establish an Advanced Manufacturing Fund to promote research and capital development for high technology manufacturing businesses
  • Raising $112.6 million through a new levy on from “entities regulated by the Australian Securities and Investments Commission (ASIC)”
  • $32 million in one-off funding for ATO audit and compliance programmes to better target black economy risks.
  • Creating a new banking industry dispute resolution framework — the Australian Financial Complaints Authority (AFCA) which aims to ensure that consumers and small business have access to free, fast and binding dispute resolution.


  • $5.3 billion to develop the Badgerys Creek Airport west of Sydney.
  • A $10 billion National Rail Program, to deliver rail projects that provide better connections for our cities and regions and create new opportunities for economic growth. This fund could support projects such as the Brisbane Metro and Cross River Rail in Brisbane, airport links in Melbourne and Western Sydney, and the proposed Adelink tram network in South Australia.
  • $8.4 billion to finance the Australian Rail Track Corporation to deliver the inland rail project.
  • $472.2 million over four years from 2017-18 to establish the Regional Growth Fund, including $272.2 million to provide grants of $10.0 million or more for major transformational projects which support long-term economic growth and create jobs in regions undergoing structural adjustment.

Training and education

  • $1.5 billion over four years for a permanent Skilling Australians Fund, to prioritise apprenticeships and traineeships for areas of current or projected high skills demand or heavy reliance on skilled migration pathways.
  • $24 million over four years from 2017-18 to establish a Rural and Regional Enterprise Scholarships program.
  • Savings of $112.4 million over five years from efficiencies in the Skills for Education and Employment Programme.
  • Savings of $43.3 million over six years by reducing uncommitted funding from the Industry Workforce Training program. (Funding of $273.8 million over six years will continue to be provided to support the engagement of industry in the national training system.)
  • A five-year shift in the balance of costs of higher education – from 42 per cent to 46 per cent for students and from 58 per cent to 54 per cent for taxpayers.  This will be achieved by gradually increasing course fees by 1.8 per cent each year, as well as lowering the repayment threshold for student loans to $42,000.

The politics

Much of the media commentary about the Budget has focused on the Government’s high-taxing, high-spending approach, and its shift away from the traditional conservative approach of smaller government.  Particularly with the bank levy and the increased Medicare surcharge, Treasurer Scott Morrison has been likened to his Labor predecessor Wayne Swan.  “Morriswan” was the label applied by Tony Abbott’s former chief of staff Peta Credilin, writing in The Australian.  Respected political analyst Paul Kelly, also writing in The Oz, described Morrison’s effort as “a Budget for the times”, and suggests it will hit the mark politically in an electorate tired of tough fiscal medicine.

The Courier Mail predicts it will “breathe new life into states like Queensland which have never fully recovered from the mining collapse”, and will be better received than Tony Abbott and Joe Hockey’s “lifters and leaners debacle”.

Opposition Leader Bill Shorten has vehemently rejected claims the Budget is a Labor-esque document, and has sought to frame the Government as taxing lower income earners while protecting businesses.  This take doesn’t stand up to scrutiny, but possibly shows that Shorten realises the Coalition has finally worked out how to play the politics of Budget time.

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