Federal Budget Wrap Up 2017
Account Manager, Renee Wilkinson
Last night’s Federal Budget is Treasurer Scott Morrison’s second and the first to follow last year’s Federal Election.
Claiming to deliver fairness, security and opportunity, the Treasurer plans to impose a new tax on banks and increase the Medicare levy on wage earners by 0.5 percent to pay for a range of packages for people with disability, schools, pensioners, GP patients and first home buyers.
The Turnbull Government appears to have been paying attention to the recent State Election results and the reaction against WA’s falling share of GST revenue, with a number of local infrastructure projects receiving funding.
It should be noted that WA Treasurer Ben Wyatt, commenting on the Federal Budget, says WA is losing $470 million in Federal education funding and nearly $100 million in health funding.
Given political news is coming thick and fast currently, here’s a simple breakdown of the headline details for WA business from the 2017-18 Federal Budget. For those wanting a closer look at the budget papers, they are available here.
The Government is predicting a positive economic outlook as the economy continues to adjust to the end of the mining boom and volatile commodity prices.
Importantly, while a deficit of $29.4 billion is predicted for 2017-18, the Treasurer is expecting a return to a $7.4 billion surplus in 2020-21.
Following a predicted decline in growth to 1.75 percent in 2016-17 as a result of weather-related factors, the economy is expected to rebound to grow at 2.75 percent in 2017-18 and 3 percent in 2018-19, supported by growth in household consumption, exports and non-mining business investment.
The underlying cash deficit is expected to be $29.4 billion in 2017-18 and improve over the forward estimates to a projected surplus of $7.4 billion in 2020-21.
Growth in wages is expected to be subdued, albeit a little stronger than recent rates, over the forecast period.
Inflation is forecast to increase moderately in that time. These factors are expected to constrain the pace of nominal GDP growth in 2017-18 and 2018-19.
A massive infrastructure program is underway with more than $70 billion allocated for infrastructure over the next ten years. Significant projects include a second airport in Sydney, the Snowy Hydro 2.0 and the Melbourne to Brisbane Inland Rail freight corridor.
The good news for Western Australia is that a number of new projects will be funded – as already announced by the WA Labor Government earlier this week.
Roads and Rail
$1.2 billion in Federal Funding previously allocated to the former Perth Freight Link project has been redirected, and an additional $400 million allocated, to 17 roads and rail projects as part of the State Government’s Metronet commitment. Along with state funding and a $226 million “GST top-up” some $2.3 billion in total is being allocated to Western Australian infrastructure projects including:
Regional Growth Fund and Building Better Regions Fund.
Armadale Road/North Lake Road (Kwinana Freeway) - Constructing bridge and collector roads (Project Costs: $237 million);
Leach Highway (Carrington Street to Stirling Highway) - Upgrade to High Street (Project Costs: $118 million);
Fiona Stanley Hospital and Murdoch Activity Centre Access from Kwinana Freeway and Roe Highway - (Project Costs: $100 million);
Roe Highway (Kalamunda Road) - Constructing Grade Separated Intersection (Project Costs: $86 million);
Outback Highway Seal Priority Sections (Project Costs: $33 million); and
METRONET - Denny Avenue and Davis Road (Armadale Rail Line) Level Crossing Removal (Project costs: $62 million).
A $472 million Regional Growth Fund
will be developed to support regional communities. This includes $200 million in funding to support a further round of the successful Building Better Regions
Big and small businesses have featured in the Budget.
For big banks, The Commonwealth Bank, Westpac, National Australia Bank, ANZ and Macquarie, a new 0.06% levy will apply from 1 July. The new tax will boost the budget bottom line by $6.2 billion over the forward estimates.
Small businesses will enjoy instant tax offsets for another year; a measure the Treasurer says will improve cash flow. Businesses that turn over less than $10 million each year will be able to immediately write off expenditure up to $20,000. This is set to revert back to $1,000 in 2018.
A business cost that is set to rise – and potentially impact businesses of all sizes – is the increase in overseas work visas.
Businesses looking to employ foreign workers under a Permanent Skilled Visa
will have to pay a levy of up to $5,000 for each foreign worker they employ and every employee on a Temporary Work Visa
will cost a business up to $1,800 each year.
In order to tackle the (mainly east coast) issue of housing affordability, first home buyers will be able to make voluntary contributions to their superannuation to save for a house deposit. Withdrawals will be taxed at a lower rate, with contributions to be capped at $15,000 a year and $30,000 all up.
In addition, a “ghost house charge” will be imposed on foreign investors who leave properties vacant, a practice known as land banking, and there will be an increase in application fees. Foreign property owners will also now have to pay capital gains tax when they sell their main residence.
Foreign ownership of new developments will also be capped at 50 percent.
There are no major changes to negative gearing or capital gains tax concessions to support the housing market.
The budget provides funding to deliver on commitments set out in the 2016 Defence White Paper
through the Defence Integrated Investment Program
and the strategies outlined in the Defence Industry Policy Statement.
The Defence budget will grow to two per cent of GDP by 2020-21, three years earlier than the Coalition's 2013 election commitment. The Government will provide Defence with $34.6 billion in 2017-18 and $150.6 billion over the Forward Estimates.
Important for Western Australia is the ongoing $89 billion naval shipbuilding program which is investing in new submarines, major surface combatants and minor naval vessels. Construction of the first of the vessels to be produced in Western Australia started in April this year.
The Australian Federal Police will receive an extra $321.4 million to fund an expansion of the force with up to 300 personnel expected to be hired.
The budget contains the already announced increases to university degrees, which will see students paying up to $3,600 more for a four-year university degree. Students will also have to start paying back their loans when their income reaches $42,000. In addition, universities will be subject to a 2.5 percent efficiency dividend.
$18.6 billion over ten years has been set aside for schools under a plan labelled “Gonski 2.0”. The model is said to not discriminate between public, private and Catholic schools.
As predicted the four-year freeze on Medicare rebates will lift this July for some GP visits, extending to specialists and medical procedures over the next three years.
It is part of a multi-billion 10-year “national health plan” hoped to counteract the “Mediscare” campaign of the 2016 federal election.
The Government is going to establish the Medicare Guarantee Fund, which will hold proceeds from the Medicare levy and a portion of personal income tax.
In addition, the budget also includes a $2.8 billion increase in hospital funding.
Doctors will be encouraged to prescribe more generic brand medicine in an effort to save up to $1.8 billion over five years.
East Coast farmers will welcome the promise of $8 billion to build the inland rail network link between Brisbane and Melbourne.
On national level, the Landcare Program will continue to receive funding – with $1 billion committed over the next five years.
Unfortunately there's no budget to improve mobile reception in regional and remote parts of the country.