Pragmatism and fairness rule
The 2017-18 Budget has much to make it popular. In fact, the goodies make it almost feel like a pre-election rather than a post-election budget. The transformation from the austerity to end “the age of entitlement” of the 2014 budget to the “fairness, security and opportunity” of this Budget has been profound.i
Key budget measures
As always, most of the key new measures were pre-announced or leaked. On the spending front, the goodies include:
- A further ramp up in infrastructure spending (by an additional $20bn over the forward years) including Western Sydney Airport, inland rail & various road projects.
- Extending the small business $20,000 asset write-off scheme and working with states to remove red-tape.
- A housing package: first home buyers can save via their super for a deposit out of pre-tax income (up $30,000), retirees who downsize get exemptions from super limits, more stringent rules on foreign investors (eg, vacant home tax), encouraging the supply of low cost community housing and rewarding states for boosting supply.
- Increased spending on health through committing to fully fund the National Disability Insurance Scheme and reintroducing Medicare rebate indexation.
- Removal of the “zombie” welfare cuts.
- $18.6bn over ten years in extra school funding (Gonski 2.0).
This has been offset by various savings, including:
- Increased university fees.
- An increase in the Medicare levy by 0.5% from 2019.
- A 0.6% levy on the major banks with liabilities over $100bn.
- More measures to curtail the cash economy and improve the integrity of the tax and welfare system.
In this video, Shane Oliver, Chief Economist, and Head of Investment Strategy at AMP Capital discusses how he believes this year’s Budget should be positive for confidence, that the impact on the RBA and the shares is likely to be minimal, and what the sensible focus on housing affordability and infrastructure means for investors.
For a full snapshot of this year’s budget results and the likely financial impacts, click here.
Contact us to discuss how the Federal Budget may impact your personal financial situation.
i This note prepared with the help of Diana Mousina, Economist, AMP Capital.