Sometimes, you need to take a step back and give credit where it is due.
Last year, at the peak at what was an emerging global crisis, the federal government threw everything at the economy bar the kitchen sink.
Their decision to go fast, go hard and go long not only avoided the worst but it also set Australia up for what has been a stellar rebound. Kudos to the Government and long may this recovery continue.
That said, a few home truths.
The pandemic still reigns supreme. We are very much still fighting this battle on all fronts and if vaccination rates remain weak, we will be fighting this fight for a long time yet.
It is often said that writing the cheque is the easiest part. Whilst credit is given to the government for putting its best foot forward, the challenge now is to ensure that this capital is deployed efficiently and effectively. Way too often incredible initiatives get chewed up in bureaucratic waste and mismanagement. Let’s hope that we can avoid such scenarios from re-occurring.
The assumptions used to substantiate the budget inclusive of future forecasts are at best an estimate and if truth be told, one can’t help but feel that these are a tad generous. Time will tell.
As a final point, and too a large extent, the proverbial sting in the tail, is that within 5 years, the government will rack up just under $1 trillion in debt. Let’s take a moment to think about this:
that’s 12 zeros
assuming 25 million people, that’s a cool $40,000 in debt for every Australian.
when will we need to repay this?
how will we do this?
and what about our friends in China. Will their appetite for our iron ore continue unabated?
Of course these are issues for another day, but for a Government so committed to the reduction of debt, this budget would have the likes of Thatcher and Regan turning in their graves. Keynesian supporters on the other hand would be jumping for joy.
Last night’s Federal Budget ticked boxes and filled gaps in Government policy that were achingly obvious from the 2020/21 Budget (hard to fathom that this was a little over 6 months ago).
Key initiatives include:
Improved initiatives and policies relating to women.
A positive response to many issues raised by the Royal Commission into Aged Care.
Additional funding to the health sector to support mental health.
A projected unemployment rate of less than 5%.
Superannuation wise, last night’s budget also addressed a few anomalies which were cause for much angst. Key changes that were announced include:
Minimum income threshold of $450 for SG payments will be abolished.
The work test to make non concessional contributions will be lifted to age 74.
The super downsizer contribution age will be reduced from 65 to 60.
SMSF structures with old style income stream arrangements will now be able to finally change and restructure their arrangements.
The residency rules for SMSF’s will be extended from 2 years to 5 years.
No change to planned SG increase meaning that employees will now have 10% of their gross salary directed to superannuation. This will take effect as from 1 July 2021.
For those in receipt of retirement income streams, the account-based pension minimum factors will now return-back to normal.
The first home super savers scheme will be extended from $30,000 to $50,000 and apply to both concessional and non concessional contributions.
Other initiatives of note include:
Low and middle class tax offset will be extended by a further year. This measure provide a reduction of up to $1,080 for low and middle income earners.
The instant tax write off will be extended for small businesses for an additional 12 months until 30 June 2023. This initiative allows qualifying businesses to fully expense depreciable assets in the current tax year.
The temporary loss carry back provision will be extended. This allows companies to claim back tax paid in prior years back to 2018-2019 where a tax loss occurs until the end of the 2022-23 financial year
In summary, the Morrison Government has delivered a budget which speaks to the environment that we are living through and have been forced to throw out the mandate of reducing debt and balancing the books. That said, the challenge remains to bring these initiatives to life and ensure the debt incurred is able to forge a pathway for a new Australia for generations to come.