The 2018-19 Budget will be the last before the next election (due by May 2019) and so had to provide pre-election goodies but in a way that keeps the return to surplus on track. Thanks to an improvement in the Budget position since the Mid-Year review, of around $7bn per annum, this has been made relatively easy. A modest fiscal stimulus will help households, but the main risk is that the revenue boost proves temporary.i
Key Budget measures
As always, most of the measures in the Budget were pre-announced or leaked. The goodies include:
- Income tax cuts from July for low to middle income earners of up to $10 a week which is mainly achieved by lifting the Low Income Tax Offset and raising the $87,000 tax threshold to $90,000.
- A plan for broader tax cuts starting in 2022, which from 2024 includes removing the 37% tax bracket and having the 32.5% tax bracket go all the way up to $200,000.
- Dropping the planned 0.5% Medicare levy increase.
- Ongoing commitment to cut the corporate tax rate to 25% for large companies by 2026-27.
- Extension of the small business instant asset write off.
- Increased spending on home aged care, various concessions for older Australians related to superannuation contributions and work tests, more hospital funding and new products listed on the Pharmaceutical Benefits Scheme.
- An extra $25bn in infrastructure spending including the Melbourne rail link, Bruce Highway, Gold Coast/Brisbane M1, road and rail in WA and North-South Corridor in SA.
This is only partly offset by various savings including an illicit tobacco tax and the usual tax integrity measures to target the black economy and multinational tax avoidance.
Read the full Financial Snapshot for the 2018-19 Australian Budget here.