Midyear budget update 2017: Freezes to family payouts and uni funding
THE midyear Budget statement includes a number of dramatic measures, including freezes in uni funding and family payments. Here’s what you need to know.
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UNIVERSITY funding will be frozen at 2017 levels from next year as the federal government continues its push to bring the budget back to surplus.
Families will also be hit by savings measures intended to bring the budget back into the black by 2020-21.
The mid-year budget update released today shows a freeze on family tax benefits part A and B until 2019 will be extended for another two years until June 30, 2021.
That’s expected to net the government savings of $184 million over the forward estimates but means family payments will not rise in line with inflation for four years.
Meanwhile, the funding freeze to the Commonwealth Grant Scheme for universities is expected to save the government $2.1 billion over forward estimates.
The freeze will be implemented from January 1, 2018.
Under the higher education reforms, students will also be required to repay HELP loans earlier and a new cap will be placed on the HELP loans they can apply for over a lifetime.
Students will start making repayments for loan when they begin earning $45,000, rather than $52,000 from mid-2018.
And the maximum HELP loan they can apply for will be capped at $104,440 or $150,000 for medicine, dentistry and veterinary science.
Finance Minister Mathias Cormann defended the freeze today, saying higher education funding would remain at a record high of at least $17 billion annually.
And, after the freeze, direct funding to universities for teaching, learning and research would grow by 8 per cent in 2020, he said.
“Australia has some of the world’s leading higher education institutions but the cost and quality of the system must be sustainable for future generations,” Minister Cormann told reporters in Canberra today.
The freeze means the government will save $544 million less over the forward estimates than it would have gained for budget repair under university funding cuts initially proposed in the May budget.
Labor, the Greens and crossbench senators had blocked the higher education cuts in the Senate but a funding freeze can be implemented without legislation.
The higher education sector has slammed the announcement.
“A freeze will put budget pressure on universities to offer fewer places in courses that are expensive to teach but hugely needed such as nursing, science and engineering,” Universities Australia chair Margaret Gardner said in a statement.
“Economists and experts are already warning about skills shortages in these critical areas and yet, this decision will end up restricting access to the kinds of courses we need the most,” she said.
Professor Gardner also warned universities in regional areas would likely to be significantly affected.
The government will also gain $1 billion over four years from a crackdown on dodgy daycare providers attempting to gain more payments by rorting the system.
It will also save $1.2 billion by extending the waiting period for migrants to receive welfare from two to three years.
SOLID START FOR NEW YEAR
Australia’s economy will be in a strong position heading into next year Treasurer Scott Morrison said when he released the budget update today.
The Treasurer revealed the federal budget was still on track to return to surplus by 2020-21.
“Our growth story remains a compelling one, with the trajectory still upward,” Mr Morrison told reporters in Canberra today.
The predicted surplus for 2020-21 will be about $3 billion higher than predicted in May this year but it remains narrow at $10.2 billion.
Meanwhile, the federal budget deficit forecast for 2020-21 has shrunk to $23 billion, down from $29 billion expected in May.
Minister Cormann said $37 billion in savings measures passed since the May budget would contribute to budget repair.
Reductions in government spending were primarily responsible for the $9.3 billion improvement in the budget bottom line, he said.
The improvement was also driven by stronger-than-expected company tax collections.
Economic growth is expected to improve to from 2 to 3 per cent in 2018-19.
Shadow Treasurer Chris Bowen said the budget update continued the “twisted priorities” of the Turnbull Government, including the push for tax relief for big corporations.
Mr Bowen also said the government wanted a “gold star and a pat on the back” for reducing the forecast debt but the mid year financial update revealed it continued to grow, just at a slower rate.
JOBS AND WAGE GROWTH
Wage growth is expected to be lower over the next few years than forecast in May.
It will mean $8 billion less revenue than expected from individuals’ taxes over four years.
Despite this, the news for job seekers in the budget update was good.
An extra 380,000 jobs were created over the year and the unemployment rate fell to 5.4 per cent, the lowest rate in four years.
And wages were expected to pick up eventually.
“The money won’t fall from the sky for wages,” Mr Morrison said.
“It won’t fall from the government. It needs to come out of a growing economy where businesses are investing and doing better.
“We’re seeing that investment now take place.
“We are seeing the profits lift, and those profits can translate into higher wages with continuing tightening of the labour market coming.”
The Treasurer vowed the government would pursue company tax rate cuts in order to boost economic growth and with added urgency given US President Donald Trump is also pushing to cut America’s company tax rate.
Labor is currently blocking the company tax rate cuts.
MORE BUDGET REPAIR
The government is expecting the budget bottom line to benefit from lower than expected spending on student, disability and aged care payments.
Fewer people than expected signed up for the disability and student payments, saving the government $1.5 billion and $1.2 billion respectively, while the number of Australians seeking the aged care pension has also grown slower than forecast, saving $755 million over four years.
Companies are also expected to pay more tax, netting the government $7.4 billion more than expected in revenue.
And Australia’s major banks will start paying the new bank tax from next year, with the first payments coming in from March.
Deloitte Access Economics’ Chris Richardson said the budget update was “undeniably happy news for Australians”.
He told Sky News universities would not be impacted too significantly by the funding freeze. “Two billion dollars is obviously a lot of money but you’re talking about higher education, which is a really big bucket,” Mr Richardson said.
“And compared to earlier efforts by governments to wind back higher education, this is probably not that big.”
Global economic growth — and particularly strong growth in China — has had a positive impact on the Australian economic outlook, documents outlining the Mid Year Economic and Financial Outlook show. Global growth is expected to jump 3.5 per cent next year and 3.75 per cent in 2019.
DRUG TESTING TRIAL
The Turnbull Government is refusing to abandon its controversial plan to introduce a drug testing trial for welfare recipients.
Labor, the Greens and crossbench senators have blocked the trial in the upper house, forcing the government to temporarily put the plan on ice.
But $1.6 million remains in the budget for the next two financial years to implement the trial.
Senator Cormann today said the government would continue to push for the drug testing, which originally was due to begin in locations in New South Wales, Western Australia and Queensland in January.
“We remain committed to it and we continue to work with all non-government senators in order to a secure majority for a very, very important welfare measure,” he told reporters in Canberra.
“It remains in MYEFO because it remains Coalition policy.”
Originally published as Midyear budget update 2017: Freezes to family payouts and uni funding