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Summary prepared by Jarmila Zaricka (Board Member, German Australian Business Council):
Presented on the 9th of May, 2017, by Scott Morrison MP, Treasurer of the Commonwealth of Australia, the main elements of the 2017 Australian Federal Budget focus on a significant increase in infrastructure spending, investment in education, contribution to the easing of pressure on Australians’ costs of living, rise in taxes for major banks, revision of and further investment into healthcare, increase in defence spending, and also tightening rules on foreign investments.
Despite additional borrowing and debt, it is expected that spending in areas that will enhance productivity, generate jobs and increase the sentiments of business confidence will contribute to the budget returning to balance in 2020-21.
The underlying cash balance is projected to improve from a forecast deficit of $29.4 billion in 2017-18 to a targeted surplus of $7.4 billion in 2020-21.
Given that the global economic outlook is improving, growth in Australia is foreseen to rebound to three per cent over the next two years. The growth is expected to be supported by household consumption, non-mining business investment and exports. As a result, wage growth is also expected to increase from approximately two per cent to above three per cent over the next four years.
Foreigners and Foreign Investment
Harsher rules on foreign investment in residential real estate will be introduced: removal of main residence capital gains tax exemption and tightening compliance.
All future foreign investors who fail to occupy or lease their property for at least six months each year will be subjected to a foreign investment levy of $5,000.
Developers will be prevented from selling more than 50% of new developments to foreign investors.
The Multinational Anti-Avoidance Law for multi-national companies not paying their share of taxes will be toughened. It will extend to structures involving foreign partnerships or trusts. Aggressive structuring methods using hybrids will also be strongly targeted.
Such measures are estimated to provide a gain of $2.1 billion.
Moreover, stricter residency rules for new migrants to access Australian pensions will apply.
Over the next four years, an investment of $10 billion is planned into Australia’s health care.
Hospitals will benefit from an additional $2.8 billion over four years.
$2.2 billion will be dedicated to the reversal of the recent Medicare and Pharmaceutical benefits measures with a new Medicare Guarantee Bill. These measures comprise of, for instance, the lifting of the freeze on the indexation of the Medicare Benefits Schedule and the removal of bulk billing for diagnostic imaging and pathology services.
Health research, including research into children’s cancer, will also benefit from an investment of $1.4 billion over the next fours years.
Aiming to generate a multiplier effect on economic growth in a low growth environment, $75 billion will be spent on infrastructure funding and financing over the next ten years.
This includes Sydney’s second airport, the Western Sydney Airport; the Brisbane to Melbourne inland rail; and underground systems in Perth and other major cities.
Significant roadwork – such as the upgrade of the Bruce Highway, the road from Pine Rivers to Caloundra, or access to the Fiona Stanley Hospital in Western Australia – is also foreseen.
The Commonwealth further intends to develop the Snowy Hydro Company by proposing to acquire a larger share from the New South Wales and Victoria governments to support that.
The extra funding of $18.6 billion over the next ten years will be dedicated to education in all public and non-government schools, in accordance with the Gonski-based ‘true needs’ standard.
Increased support shall also be delivered to veterans’ mental heath, victims of violence and abuse and to the pursuit of closing the gap for Indigenous Australians.
In Higher Education, however, students will be asked to contribute more to their own costs.
Cost of Living
A new set of agreements to address supply of accommodation as well as to help people save for their first home will be put into place. To decrease housing prices, the Commonwealth will work with States and Territories to generate offer by developing more residences. In parallel, significant tax concessions (same advantages as for Superannuation) will apply to people’s first home deposit savings. Under the new scheme, The First Home Super Savers Scheme, most first home savers will be able to accelerate their savings by at least 30%.
Furthermore, $375 million will be allocated to fighting homelessness.
The recently announced new energy security plan aims to provide reliable and affordable energy for domestic use. $90 million has been allocated to securing gas resources for Australians. In addition to $3 billion that has already been provided to support new emissions technologies, a further $37 million is foreseen for new energy infrastructure for South Australia.
Such investments are among those aimed to ease pressures on the general rising cost of living.
Pensioner concession cards will be restored to those who were impacted by the recent pension assets test – thus regaining access to state and territory based concessions.
The commitment to increase defence spending to two per cent of GDP will be met in 2020-21, three years ahead of schedule.
A further $300 million will be dedicated to the fight against terrorism, organized crime and child exploitation.
Regarding illegal immigration, Operation Sovereign Borders will continue to be funded to deliver on its objectives of ‘stopping the boats’.
In addition to recent legislated tax cuts, small businesses with a turnover of up to $10 million will be able to write off expenditure up to $20,000 for a further year.
Furthermore, the Commonwealth will work with states and territories to reduce red tape costs for small businesses.
Starting on the 1st of July, 2017, a point levy on banks’ liabilities will be introduced. It will only be applicable to Australia’s five largest banks with assessed liabilities of $100 billion or more, excluding Superannuation funds or insurance companies. This measure will secure $6.2 billion over the Budget.
Also, tighter rules regarding breach of conduct will be introduced, resulting in bigger fines for banks in breach: from $50 million for small banks to $200 million for large banks.