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Australian budget raises taxes, cuts spending as deficit hits $A50bn

The Abbott government has confirmed sweeping tax increases and aggressive spending cuts in a budget that tackles a yawning deficit of nearly $A50 billion.

Treasurer Joe Hockey outlined plans to reduce welfare spending on families, pensioners and the unemployed. High earners will face a temporary 2% tax on income above $A180,000, while motorists will face an increased fuel levy.

Mr Hockey says the shock treatment is needed to reverse a long string of deficits under the previous Labor government, cut rising government debt and restore the economy to robust growth.

He says Australia has been "beyond its means" since the mining boom ended and cut the flow of government revenue.

"We were not prepared to stand by while a fire was starting in the house, " he says. "Unless we fix the budget together we will leave the next generation a legacy of debt, not opportunity."

The government projects the budget deficit will fall to $A2.8 billion in four years – from the $A49.9 billion estimate for the present fiscal year ending June.

Benefits for business
Big and small business are among the few beneficiaries with promised tax cuts and big infrastructure spending.

The corporate tax rate will drop by 1.5 percentage points from July 2015, helping about 800,000 businesses. That's on top of the axing of the carbon tax and mining tax.

The tax cut will offset the burden of the government's paid parental leave scheme, also due in July 2015.

A new $A11.6 billion outlay on infrastructure, set to take the total spend to $A50 billion by 2020, will provide new projects for big business.

Companies will receive financial assistance to access export markets, manufacturers moving into new growth industries will be eligible for grants, while the energy and resources sector will be encouraged to explore for new mineral deposits.

"Rather than corporate welfare, the government's focus will be on strengthening the overall business environment, so that enterprise, large and small, can create more jobs in Australia," Mr Hockey says.

Winners and losers
Medical researchers and working mothers are favoured while most families and pensioners will be worse off. Some specific measures are:

Education

  • Student loans to be repaid once salary reaches $A50,638 from July 1, 2016
  • School funding cut by $A30 billion over the next four years and more of the cost will be handed to the states.

Health

  • $A20 billion medical research fund to be established
  • Doctor’s visit charge of $A7 for pensioners and children
  • Hospital funding to the states cut by $A1.5 billion

Motorists

  • Indexation of fuel excise reintroduced from August 1 will add 2-3Ac a litre to petrol

Job seekers

  • No unemployment benefit for six months for new jobseekers under 30
  • Work for dole scheme

Families

  • Paid parental leave scheme introduced with an income cap of $A100,000 a year
  • Dependent spouse tax offset abolished

Pensioners

  • The retirement age will rise to 70 by 2035
  • Pensions indexed to inflation rather than wages.

For more detail on the Australian Budget 2014, see the budget in detail.

What do you think? What do you think of Joe Hockey's austerity measures?  Click here to vote in our subscriber-only business pulse poll.

More by Nevil Gibson

Comments and questions
2

As usual corporate Australia are the only real winners while society's most vulnerable will pay for abbots like and twisted priorities. Bring on the double dissolution!

A very radical hard needed Australian budget, with broad spectrum radical incremental changes that will be much more fast moving in their effects than most see. As some critics see is a deep fast burn and in some senses 'the end of civil society , and ideas of the ALP left of the 1970's. Within 5 years it will probably finally seal any chance of real male social mobility in Australians as comprehensively as W43 and Osborne have done.
Correctly it massively will reduce public health expenditure,particularly in the hospital sector and will also end the 3rd rate universities and ineffectual tenure and courses. It will mean that the Australian universities return to being serious academic instituiions and the sort of policies that have destroyed any credibility in higher NZ education due to Clark, Marshall and Parika end. Within 5 years you will probably need to be assured of a $60,000 yr salary to risk taking student loans for even a B A or BCom as student fees uncapped will rapidly exceed $20,000 year. The Californian Swarzaneeger approach of using public expenditure mainly for comprehensive infrastructure and restoral of advanced urban and interurban transport systems is restored ( I have always favoured light rail in Auckland and electrification south to Huntly rather than the loop as capacity can be increased 50% on the curren tAuckland rail system with faster running and slipper platforms opposite the Quest hotel as the start of the west line thru Newmarket. . Defence will be a high priority- I recommend 4 Dutch 3700 OPV Holland class rather than modernising too old Anzacs for NZ.
The main thrust is that all will work and study until age 30/35 and after that in some cases welfare will be option.The aim is to give everyone a chance and to find out who will fit and be really useful in the workforce. The aim isn't the NZ idea of enforced conformity and cohesion but the very different one of maximising Australian capability and productivity. It is the standard western approach recommended even by me. In some senses universal health care is being abandoned because its current and escalating cost can not be sustained and Health policy as advocated by the medical profession is increasingly about capture and control and nobody about client or patient interest. The benefiicaries of Obama care would generally be better off with being controlled by the available 3rd rate foreign speaking Doctors.
The Abbot/ Bishop is also powerfully aimed at New Zealander that our low grade workers to do the jobs no Australians will do, are no longer wanted and that Australia has only been interested in the good looking, able and professionally qualified and the intelligent part of the trade skill market.In other words the pump has been put on to force much of the NZ population back to Auckland to hold NZ as a western ally for Australia rather than a neutral or Chinese ally. University education for New Zealanders will only be available for the top 2%, very rich by NZ standards and some of the progeny of the higher professional class. That has actually been the Australian aim since about 1990 but the message has never got thru.
The ultimate detail has a lot of deceptive vicious detail, which may be unhelpful to the long term success but will help slide the core thu Canberra in the next few weeks. The background is a good Australian understanding of the rapidly changing strategic, technological and social situation in the world where in Wellington the world is seen through the blinkers of 1984, 1972 pr 1949