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Budget 2016

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Through the Community Radio Network, 2SER's On The Money team presents special coverage of the 2016 Federal Budget.

On Tuesday 3rd May 2016 from 7:30pm, 2SER and SYN reporters will take you inside the Budget Lockup, for a half-hour live special, to find out how your tax dollars will be spent. What services will be cut? Who will be the winners and losers in the government's budget?

Community Radio's coverage look at the issues relevant to you, with expert commentators from UTS Business School and On The Money's own budget team such as Doctor Peter Chen, Doctor David Bond and Richard Dennis. It can be heard Australia wide on the Community Radio Network.

For our budget coverage from 2015, click here.

Budget Special 2016

Community Radio's coverage of  Budget 2016 featuring Dr Peter Chen and Dr Amanda Elliott from the University of Sydney, Dr David Bond from the University of Technology Sydney Business School. 2SER News Director Murray Olds and reporters Roderick Chambers, Andrew Barclay and Paul Brescia from 2SER, Max Stainkamph from SYN Media Melbourne, Kyle Dowling from CAAMA radio Alice Springs and Jasper Lindell from 2XX Canberra. Special Guests: John Daley, CEO, The Grattan Institute, Peter Martin, Economics Editor, The Age, Jon Bisset, CEO, Community Broadcasting Association of Australia, Matthew Rose, Chief Economist, Australian Conservation Foundation. It was presented by Daniel Helion in Sydney and Catherine Zengerer in Canberra.

Max Stainkamp & Jasper Lindell - Education in 2016 Budget

"The government will go to the election with room to move on higher education funding reform, revealing in the budget tonight it will extend the consultation period on deregulation of university fees until 2017.
This will hit the government to the tune of $250 million this year, but still budget for 1.6 billion dollars' worth of savings from university deregulation over the next four years.
This will allow the government to go to the election saying they haven't committed to deregulation.
But make no mistake, it is coming.
The government have also moved to shake up the HELP system.
There will be an 8-week consultation period into the future of the scheme, which allows students to loan from the government to pay for tertiary education.
The period will end in June this year after the election, which means no policy will be outlined before the election.
The Budget is vague on the details of HELP changes, but it says the government currently accounts for 58% of tertiary funding and has suggested it wants to cut that by 20%.
No parameters are placed on the consultations, so at this stage everything is on the table.
As expected, the government has also committed to 1.2 billion dollars' worth of funding for state schools, lifting funding to 20 billion dollars a year by 2020.
However, this 1.2 billion falls three and a half billion short of the Gonski reforms promised by the last Labor government, and that Tony Abbott pledged not to scrap when elected.
Labor and the Greens have said they will commit 4.5 billion to fully fund Gonski reforms.
In further news around High Schools, the government will now force students to take one English or Humanities subject and a Maths or Science in order to achieve an Australian Tertiary Admissions Rank"

-- Max Stainkamph and Jasper Lindell

Dr David Bond - Federal Budget 2016 Outlook

Scott Morrison delivered his first Federal Budget last night, claiming it is not just another budget, but an economic plan. The centerpiece of this economic plan is the ten year enterprise tax plan, which is expected to cost the Government nearly $9 billion over the next four years and deliver a one percent increase in GDP.

The path to surplus has pushed back a further year after last year's budget to 2020-21, although this is consistent with the forecast in the 2015-16 MYEFO (Mid-Year Economic and Fiscal Outlook) from December 2015.

The underlying cash deficit is expected to be $37.1 billion in 2016-17, which is better than many of the pre-budget predictions, it is still slightly larger than expected at the December mid-year update which forecast a deficit of $33.7 billion for the same period. This change has primarily been driven by lower income tax receipts from individuals (down 1.8%) and companies (down 2.4%). The total deficit over the forward estimates is expected to be $84.6 billion.

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The assumptions underlying this Budget seem to be very much in line with the 2015-16 MYEFO. Real GDP growth is forecast to be 2.5% for 2016-17 before rising to 3.0% in 2019-20.

The unemployment rate is expected to hold steady at 5.50% over the next four years. This is a slight improvement on MYEFO. This is also lower than the March 2016 figures released by the ABS last month which had an unemployment rate of 5.8%.

In terms of major changes, there is very much a focus on jobs and growth, with policies to support small and medium-sized business invest and create jobs. As the Treasurer commented yesterday, "the best form of welfare is a job". A number of major new measures have been introduced this year, and in summary include:

  • An expansion of the definition of small business from those with up to $2 million in turnover to those with $10 million in turnover. This will allow up to 100,000 extra business to gain access to existing small business tax concessions. This is expected to cost the Government $2.2 billion over the next four years;
  • A reduction to the corporate rate of tax to 25.0% by 2026-27. This will occur in a staggered fashion, with smaller businesses receiving cuts first. This is expected to cost the Government $2.7 billion over the next four years;
  • Adjusting the 32.5% personal income tax threshold from $80,000 to $87,000 from 1 July 2016. This will reduce the marginal rate of tax on incomes between $80,00 and $87,000 to 32.5% from 37.0%. A person on average full-time earnings will receive an income tax cut of approximately $51 per year. This will affect approximately 3.1 million people and cost the Government $4.0 billion over the forward estimates;
  • A raft of changes to tax concessions on superannuation, especially those with higher incomes and balances. For example, the threshold at which point contributions tax doubles (from 15% to 30%) kicks in was previously $300,000, and this has been reduced $250,000. Overall these changes will bring in an extra $6 billion over the next four years;
  • The tobacco excise will increase by 12.5% a year from 2017 to 2020. A packet of cigarettes is expected to cost $45 by 2020, and overall this measure will bring in $4.7 billion over forward estimates.
  • The creation of the tax avoidance taskforce to combat multinational tax avoidance. This taskforce will cost approximately $700 million to setup but is expected to bring in over $3.7 billion. In addition a diverted profits tax ("Google tax") will be introduced to stop companies using offshore tax structures to avoid paying Australian tax.

As usual the devil is in the details. Things are better than we expected but this surplus will only come about if we see the growth in GDP and jobs the government is hoping for.

-- Dr David Bond, UTS Business School

Paul Brescia - Social Services & Health

In a budget so focused on jobs and growth, big ideas needed to be put forward by the Government for social services, and moving the unemployed into employment.

In the lead up to the budget, social services bodies such as ACOSS have been calling on the Government to lift income support payments (which haven't increased in real terms in over 20 years). In this context, the social welfare aspects of the budget have been a huge disappointment.

Unemployed people will now enter the universally discredited 'Work for the Dole' program after 12 months, instead of six months. The Government claims this will save $500 million, which will be used to fund their new Youth Jobs PaTH program.

The "Youth Jobs Path" is a three stage program which will involve up to 30,000 under 25-year olds every year. Job seekers will receive training to develop the basic skills needed to work. After this, they will be placed in 4 to 12 week-long internships, being paid $200 dollars a fortnight, on top of their dole payments. Young people will be required to work 12-25 hours a week. For a job seeker interning 25 hours a week, this equates to $4 an hour. Businesses taking on interns will receive $1000 upfront for each intern, and up to $10,000 for job seekers they hire permanently. To qualify for the program, you have to be registered with government employment services for at least six months. Scott Morrison says this is a 'real plan for real jobs'.

The Turnbull Government will extend trials of the controversial 'Cashless Debit Card' in an effort to reduce what they call "welfare fuelled alcohol consumption, drug use and gambling." 80% of a person's welfare payment will be placed on a card which cannot be used to withdraw cash, purchase alcohol, or gamble.

The Government is putting forward a 'Compulsory Rent Deduction' Scheme. Under the scheme people receiving the dole, living in public and community housing, would have their rent automatically deducted from their payments, and given to the housing provider. This could potentially extend to housing damages too, so a person living on income support would face even more severe financial difficulties in the event of something going wrong.

Compensation for the carbon tax has been scrapped for new welfare recipients. It stays in place for people already receiving it, creating a two-tiered welfare system.

In the Health Portfolio, the budget claims an extra 2.9 billion dollars will be invested into public hospital services, however, this is undermined by cuts to aged care. 1.2 billion dollars is being taken away from aged care providers, at a time when Australia is dealing with an aging population.

The Government has continued to defund federal dental programs, instead relying on the states to provide 60% of the funding for its new Child and Adult Public Dental Scheme.

For people hoping to access the Disability Support Pension, there will now be an extra hoop to jump through. Government appointed doctors will assess whether or not you have even a 'partial' capacity to work, potentially disqualifying you for the payment. The percentage of successful applicants has already been in decline under the Coalition government, and there is concern that people who genuinely need the payments will miss out.

-- Paul Brescia

Andrew Barclay - Innovation & the 2016 Budget: The Ideas ‘Pop’

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'Innovation' has long been considered one of the Prime Minister Malcolm Turnbull's favourite ideas. Accordingly, plenty was riding on the Budget when it came to innovation. Yet, it appears the Government has fallen short of its own high expectations.

Did it deliver?

Very little in terms of new announcements. After having been sold to the electorate as 'The Ideas Boom', the failure to deliver could be one of the big negative take outs from the Budget. As the above diagrams show, Innovation features front and center of the Budget's glossy brochures, but doesn't deliver much in the way of specificinitiatives. Instead, they've said innovation will be driven by their small business tax initiatives through "jobs, growth and productivity".

What specifically is there in the Budget?

Despite months of talk of agility and nimbleness they've delivered very in terms of tangible announcements that directly address innovation.

According to the Budget, there are three key ways it will drive innovation:

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How will it be funded?

That was the $1.1 billion dollar question. Would it be funded through standalone funding or cannabilsation of existing initiatives?

Neither. Because there was nothing in the way of new expenditure for innovation directly, the Government has been able to skirt around that question because the National Innovation & Science Agenda was already funded.

Will it make a difference in our transition to the 'knowledge economy'?

There's no denying Australia needs to better how it fares when it comes to innovation, given it is currently ranked 17th in the world (Global Innovation Index).

Startups will no doubt welcome the financing and investment changes, given the National Innovation and Science Agenda was already announced, it's unlikely it will hugely move the dial.

-- Andrew Barclay

Peter Chen - Political Analysis of the Budget

Treasurer Scott Morrison has made a fist from a bad hand he has been dealt in delivering his first (and unless the public back his play on July 2nd, possibly last) national budget. With a short timeframe to prepare the budget following the 2015 change of leadership, a comparatively restrained economic position, and the inheritance of a set of spending commitments by his predecessor, the Treasurer has presented a budget free from the proliferation of "what's in it for me" tax and transfer commitments Australian's often see in election-year budget.

Instead Morrison has framed his budget around a "ten year economic plan" focused on: Tax cuts for small and medium-sized businesses as the drivers of future growth and employment; A limited set of small incentives to address issues associated with endemic youth unemployment, and; Taxation changes aimed to bring Australia into line with comparators in the OECD.

The politics underwriting today's announcements are seen in three themes that run across the budget papers and the deliberate strategy of selectively leaking key budget announcements over the preceding weeks.

First, the budget lacks any significant surprises. Chastened by the experience of Tony Abbott and Joe Hockey in 2013, the budget itself is remarkable in that its major initiatives have all been well ventilated to date. Tax cuts, anti-avoidance measures, the so-called "Google-tax", alterations to superannuation and tobacco tax to pay for new expenditure, infrastructure spending, and major defence initiatives were all trickled out in the lead-up to today's announcement. Some areas of significant push-back have resulted in adjustments to the specifics, such as reported pressure against lowering the superannuation threshold to $180,000.

Second, the budget process have been about neutralising negatives. Having taken changes to negative gearing off the table just before ANZAC day, the budget plugs a lot of weaknesses in the Coalitions recent history: High profile environmental issues (only) get money, such as the Great Barrier Reef; There are tax changes that support (predominantly) women's experience of structural disadvantage in superannuation savings; The "Panama Papers" issue has been addressed through a crackdown on high wealth individuals and off-short tax minimisation by transnational corporations, and; Asylum issues are framed as now presenting an economic dividend through enabling the government to decommission domestic detention facilities.

Third, the realities of electioneering are addressed by the simple expedient of throwing infrastructure and industry development projects as areas likely to have marginal electorates in them.

But the budget has political weaknesses too. "Backed-in" (one of the Finance Ministers favourite terms of art) through an expensive public advertising campaign, there's little of the "ideas boom" to be seen in the budget itself. Innovative financial technology systems gets some money. There's a small pot of cash for people to engage in start-ups, and the budget re-references regulatory and tax incentives already announced to encourage risk taking. But overall the budget doesn't spend a lot of time tell us where innovation comes from beyond the general argument that small and medium businesses are more "agile" in nature. This seems to reflect the rumours that there is not a perfect synchronicity between the Prime Minister and his Treasurer.

This lack of innovation might be explained by the other big missing piece of the budget: Skills training and higher education. The budget papers were accompanied by a discussion paper by the Department of Education that parks the proposed reform of higher education (rejected by the Senate in 2015) into a new period of consultation. While the Government clearly is hoping that a new "sell" of deregulation will get the public onside for a second pass at the legislation in 2017, kicking higher education and skills into the long grass leaves a core driver of innovation in effective limbo. While innovation is not driven by public institutions exclusively, the relationship between highly technical, well-funded universities in California and the development of Silicon Valley is not a co-incidence.

Deflecting a debate on negative gearing is unlikely to take issues of housing affordability and homelessness off the political agenda. With a number of key marginal seats in Sydney, this issue is almost certain to dominate parts of the election campaign. On this issue the budget is essentially silent (though superannuation changes will incentivise some house recycling by older people), and previously allocated transfers to the States for homelessness comes to an end in 2017.

Finally, productivity. In this area the government talks a big game, but provides limited substantive attention. With a stated target of 0.6% the Government signals they intend to grow productivity at a higher level than the period of massive microeconomic reform of the 1980s. Tax cuts to business are framed in productivity terms – that owners of small and medium enterprises will, assumedly, plough some of this largess into new technology, training and plant – but issues associated with generally increasing workforce participation beyond youth unemployment, or public sector productivity are largely absent from the document. Of all the assumptions in the 2016-7 federal budget, this assumption seems the most heroic.

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