10 things to expect from the federal budget

10 things to expect from the federal budget
10 things to expect from the federal budget

1. Deficit

It should come as no surprise this year’s budget will deliver a deficit.

The government has used the lead-up to the budget to lay the blame for the shape of the country’s finances with the previous government, warning the electorate that immediate sacrifices are needed for long-term gain.

The most recent estimates place the expected deficit in the arena of $47 billion, with future budgets also expected to show the government’s accounts in the red until at least 2019-20.

Hockey has said in pre-budget speeches that the government will aim to reduce real spending growth by 1.75% over the next five years to turn things around.

2. A debt levy of some kind

The government’s so-called debt levy has gone through a number of guises since it was first leaked, but cabinet has signed off on the tax increase, so we know it is coming.

The government looks likely to impose a 2% increase on the highest income tax rate, which will affect around 650,000 taxpayers on incomes above $180,000.

Unsurprisingly, the debt levy is one of the more controversial measures to be included in the budget, with accusations the government has broken pre-election promises not to change existing taxes or introduce new taxes being hurled at the government, even from within its own ranks.

Hockey and Prime Minister Abbott have both said the levy will be temporary, but as most people know, once a tax is introduced it is very difficult to undo.

3. Less money for corporate welfare

In one of the more recent pre-budget leaks, the government has said it will reduce the amount of money available to struggling companies by $10 billion.

Hockey flagged the move a few weeks ago, using a speech about the economy to outline the government’s position when it comes to corporate welfare. However, there is little information about what shape the cuts will take at this stage.

Hockey said on the weekend “those who depend heavily on government support will not necessarily receive the same support into the future”. 

“Business has a responsibility to manage itself in the same way we expect (others to do so), other than those most vulnerable in the community,” he said.

4. A raise in the retirement age

Australians will need to start preparing to work for longer, with the government set to raise the retirement age to 70 within coming decades.

While Prime Minister Abbott has ruled out making changes to the eligibility or indexation of the age pension for the next three years, the government is widely tipped to proceed with plans to change the age at which Aussie workers can retire.

“With four or five seniors on the pension, the number of workers per retiree dropping from five to three by 2050, and more than 1000 people becoming eligible for the age pension every single week, long-term reform is essential and unavoidable,” said Abbott recently.

5. Paid parental leave

Voters can also expect to see Abbott’s paid parental leave in the budget, although in a scaled-back form.

The scheme, first proposed by the Coalition when it was in opposition, is expected to cost $5.5 billion each year, with the aim of encouraging more Australian women to return to work after having children.

The eligibility threshold for the scheme was originally set at $150,000, but faced with growing concerns about the affordability of the scheme from opposition parties and within his own party ranks, Abbott has cut the threshold to $100,000.

The scheme will continue to pay six months of 26 weeks parental leave based on the recipient’s full-time salary, but the maximum payouts from the scheme will now be capped at $50,000 instead of $75,000.

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6. Extending unfair contract protections for small business

Small Business Minister Bruce Billson has advocated for the extension of unfair contract protections for small business for some time and small business owners can expect to see this policy in tonight’s budget.

The policy would grant small business the same unfair contract protections currently available to consumers under the Australian Consumer Law.

Billson previously said  he finds small businesses often have to negotiate with big business on a take it or leave it basis under standard form contracts which place a disproportionate burden on one party over the other.

“What happens with standard form contracts is businesses use them irrespective of the scale or legal status of the person they are contracting with, consumers have certain protections but small businesses have no more power to negotiate and no access to those unfair contract provisions,” he said.

7. A higher level of fuel excise

In a bid to improve the budget’s bottom line, the government will use the budget to increase petrol tax by reintroducing the twice-yearly practice of indexing fuel excise in line with inflation.

It’s been 13 years since the fuel excise was indexed to inflation and in that time motorists have paid 38.1 cents per litre in fuel excise. According to news reports, unfreezing the indexation will add up to three cents a litre in the first year.

It’s bad news for small businesses, which will be faced with rising costs and therefore tougher competitions from the big end of town.

Peter Strong, executive director of the Council of Small Business of Australia, previously said it’s important for small business owners to start planning for the change now.

“The costs of goods will go up everywhere because the cost of transport is going up,” said Strong. “If you’re in a business where you’re using your car a lot, you’re going to have to think about what this means.”

8. Cash for infrastructure

Hockey said this week that a higher level of fuel excise will help fund a massive investment in roads, worth a total $82 billion.

The government plans to commit $40 billion to its roads package, with the remaining $42 billion to come from state governments and the private sector.

“If we are going to make any changes to fuel excise, it will go into roads, and we are laying out a plan for the biggest increase in road expenditure in Australian history,” said Hockey.

However, at least some of the government’s contribution will come from re-announcing projects earmarked by the previous Labor government, and opposition infrastructure spokesperson Anthony Albanese has raised concerns the spending will come at the expense of investment in public transport.

9. Privatisation of the ASIC register

Media reports have put the number of government agencies to be abolished, merged or sold in this year’s budget at somewhere between 50 and 70.

One agency which appears to be in the confirmed table is Australian Securities and Investments Commission’s corporate register, which the government will seek to privatise.

As previously reported, the register is estimated to generate more than $625 million in revenue and has annual costs of around $140 million.

10. Health co-payments and welfare cuts

The introduction of co-payments for GP visits and cuts to welfare payments have been expected for some time.

While the introduction of a GP co-payment may not appear to have an obvious impact on small businesses, SmartCompany blogger Bri Williams says there are some important behavioural and business lessons to take from the policy.

This article first appeared on SmartCompany.

Picture courtesy of Flickr/Creative Commons.

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Budget

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