Budget 2017 wrap
A detailed look at the key components of Treasurer Scott Morrison’s 2017 Budget, handed down on 9 May, 2017.
- The Turnbull government’s 2017 Budget recasts the political debate with a big-spending and high-taxing economic statement.
- Treasurer Scott Morrison has moved to slay the so-called “zombie” savings measures of the 2014 Budget.
- The Turnbull government now needs to sell its new Budget, as Budgets often fall flat a week or two after delivery.
By Steve Lewis.
With a Budget that lays to rest the ghost of Joe Hockey’s horror 2014 Budget, the Turnbull government has recast the political debate with a big-spending and high-taxing economic statement.
On Budget night, senior government ministers were confident that voters would respond positively to Treasurer Scott Morrison’s second Budget, which seeks to steal much of the Australian Labor Party’s thunder, particularly concerning the banks and constant calls for a Royal Commission into the financial services sector.
While the federal election is not scheduled to be held until mid-2019, the Coalition is hoping Budget 2017 will help it regain much-needed momentum as it tries to turn around a run of negative opinion polls.
The government has pressed the button on a number of big-ticket nation building projects, particularly the Inland Rail, which received an injection of A$8.4b. Deputy Prime Minister Barnaby Joyce describes the 1,700km rail link as a “corridor of commerce” that will deliver a much-needed boost to large tracts of regional Queensland, NSW and Victoria.
Digging into Budget 2017
Budget 2017 combines ruthless pragmatism – “bash the banks” – with unashamed market intervention, including a surprise move by the Commonwealth to buy out NSW’s and Victoria’s shareholding in the Snowy Mountains hydroelectric scheme. It also puts in place a series of measures designed to improve housing affordability in the big capital cities, although the government again failed to tackle negative gearing in a significant fashion.
This year’s budget also aims to neutralise Labor’s vote-grabbing scare campaigns on health and education. Billions will be pumped into the health system to bury the Medicare hoodoo, which almost cost the Coalition office in 2016, by setting up a Medicare Guarantee Fund and lifting the freeze on medical benefits schedule indexation. The move has been welcomed by the tough-speaking doctors’ lobby.
Prime Minister Malcolm Turnbull still faces a potential revolt over schools funding, not the least from his own backbench (including former PM Tony Abbott, who raised concerns over a return to the Gonski formula in Tuesday’s party room meeting).
By the numbers
Looking at the actual numbers in the budget, the Treasurer has moved to slay the so-called “zombie” savings measures of 2014 at a cost of A$13b.
In a move that has shocked the nation’s banking sector, the Treasurer announced a new 0.06% levy (read: tax) that will kick in on 1 July, 2017, and impact on the big four banks as well as Macquarie. It is forecast to raise A$6.2b over four years, with the Australian Bankers’ Association warning that it will impact bank customers, shareholders and those with superannuation funds.
Nonetheless, the government won’t mind banking CEOs expressing public outrage over this measure, and it will help neutralise Labor’s campaign for a Royal Commission into the financial services sector.
Addressing housing affordability
One of the core elements of the budget was the attempt to finally confront housing affordability. With house prices out of the reach of most younger Australians – even those with well-paying jobs – the government has been forced to deal with this mother of a BBQ stopper. The budget included creating incentives including superannuation tax concessions to help first-home buyers, reducing barriers to downsizing to free up larger homes for families and improving the targeting of housing tax concessions.
Surplus Commonwealth land will be released and the government will boost social housing support for the vulnerable. Will it change the outlook for first-home buyers? Perhaps a fraction, but it is unlikely to fundamentally dampen the rampant price increases in Sydney and Melbourne.
Catching up on infrastructure
One area where the budget also plays catch up is infrastructure. Electoral anger about road and rail congestion and investment backlogs has been targeted through a very significant programme of new infrastructure investment in cities and regional areas.
Sydney’s western suburbs – where the Coalition badly lost ground and seats to Labor at the 2016 election – has been given a financial boost with A$5.3b ploughed into the development of Sydney’s second airport. It forms part of a A$70b, ten-year commitment to transport infrastructure using a combination of grant funding, loans and equity investments.
The infrastructure funding blitz also includes A$844m for the Bruce Highway, A$1.6b in infrastructure funding for Western Australia, and A$1b to be made available for Victorian regional rail and other infrastructure projects.
The Nationals are deliriously happy with the spending on the bush, with hundreds of millions of dollars also set aside to repair creaking timber bridges in rural hamlets.
The spending will partly be overseen by a new Infrastructure and Projects Financing Agency to help assess infrastructure project choices, recruiting people with commercial experience as well as a Regional Investment Corporation to streamline delivery of A$4b in concessional loans.
Selling the budget
Now it is time for the Turnbull government to step up its sales job, knowing that many budgets often fall flat a week or two after delivery.
And Labor will get its chance to outline its alternative budget vision when Bill Shorten delivers the opposition leader’s address on Thursday night. The budget battle is just beginning.
Steve Lewis is a former senior member of the Canberra press gallery and author who also works as a senior adviser for Newgate Communications.