Budget 2019: Tax cuts and surplus to set up May election
Tax cuts for millions of workers and the first surplus in 12 years have set up a dramatic May election showdown between Prime Minister Scott Morrison and Opposition leader Bill Shorten. SEE THE BUDGET CALCULATOR AND HOW IT AFFECTS YOU.
Tax cuts for millions of workers and the first surplus in 12 years have set up a dramatic May election showdown between Prime Minister Scott Morrison and Opposition leader Bill Shorten.
The Coalition has restored the nation’s finances, promising a budget surplus of $7.1 billion next year — a stunning $55 billion turnaround from the deficit inherited from Labor — and a clear path to eliminate net debt by 2030, saving the country a massive $18 billion a year in interest.
The message to voters in last night’s budget sets up the Coalition’s campaign manifesto which hinges on a stark contrast between a Morrison government that can be trusted to deliver without raising taxes and a Labor Opposition who will rely on hikes.
Treasurer Josh Frydenberg’s maiden budget makes a direct pitch to 10 million of the nation’s low and middle class earners, along with small businesses, young people, seniors and even women in an economic road map crafted to blunt Mr Shorten’s electoral bid for these crucial voters.
Mr Frydenberg also delivers a suite of infrastructure measures across the country including a new $1.6 billion for NSW’s M1 extension to Raymond Terrace, under a $100 billion decade-long nationwide commitment to put more cranes in the sky.
The budget lays out the biggest personal income tax since the Howard era, pledging $158 billion in additional tax relief for Australians with a clear, deliberate focus on low and middle income earners.
Ten million of these workers will get immediate tax breaks, putting up to $1080 back in the pockets of singles and $2160 for dual income families to ease the cost of living by more than doubling the low and middle income tax offset.
In what will be a crucial election pitch, this money will flow into pockets within 13 weeks — after the next set of tax returns — with the government hoping the extra cash in pockets will also work to get the economy moving.
In his budget speech, Mr Frydenberg was at pains to say these were “teachers, tradies and nurses” who would receive these tax cuts — a clear call the must win mortgage belt.
Shoring up the government’s cost of living credentials, Mr Frydenberg said: “this is money that could go towards your monthly mortgage payment, your quarterly power bill or your car insurance.”
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The boost is a deliberate tactic to neutralise Mr Shorten’s overtures to workers after the Labor leader last year doubled the government’s tax offset.
The government then will move to tackle tax brackets, but the big change — reducing the 32.5 per cent marginal tax rate to 30 per cent — will not come into effect until 2024.
This significant reform will make Australia’s tax system “highly progressive”, Mr Frydenberg said, covering taxpayers earning between $45,000 and $200,000.
The reform touches lower income earners too, with the government increasing the top threshold of the 19 per cent tax bracket from $41,000 to $45,000 in 2022.
Low income earners will also benefit from an increase to the Medicare levy low income threshold to take account of inflation, so that low wage earners continue to be exempt from the sting.
The Coalition will not take the changes to parliament this week and instead will fight the election on them.
Mr Frydenberg used his budget speech to lay out the risks the economy faces as the country decides who will be the next government.
“The fundamentals of the Australian economy are sound but there are genuine and clear risks emerging both at home and abroad,” he said.
Mr Frydenberg pointed to the residential housing market cooling, credit growth easing, the looming impact of flood and drought on the economy and global slowdowns in China and other worldwide partners.
This messaging will be key in the Coalition’s campaign as it seeks to cast itself as the safe pair of hands Australia needs to choose at the ballot box.
The budget also makes a direct pitch to small business, expanding the instant asset write-off to those with a turnover of up to $50 million and lifting the value from $25,000 to $30,000. This means another 22,000 businesses employing 1.7 million people will have access to the tax break.
Business and young people are also wooed with a $525 million skills package that doubles incentive payments to employers to $8000 per placement and payments for apprentices to $2000 per placement.
Faced with a battle to win over the critical female vote, the budget makes a series of direct offerings to women, including funding for girls to participate in STEM subjects, complementing the future female entrepreneurs program.
In health, the budget targets women with money for domestic violence and eating disorders.
Mr Frydenberg has also reinforced PM Morrison’s commitment to investing in mental health and money for carers.
This joins the already announced promise to give pensioners one-off energy assistance payments of $75 for singles and $125 for couples.
Mr Frydenberg began last night’s budget speech by laying out a Liberal manifesto.
“We believe in reward for effort,” he said.
“The power of aspiration and enterprise. Upholding personal responsibility and always providing a helping hand to those who need it.”
In stirring remarks that are likely to guide the Coalition’s election campaign, Mr Frydenberg said, “this budget requires discipline. This much at least we owe our children.”
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