The Australian government announced the first federal budget surplus in more than a decade on April 2.
The centre-right Liberal coalition government revealed on budget night the national expenditure has returned to profitability for the first time since the year 2007.
“The budget is back in the black with the Morrison government delivering the first budget surplus in more than a decade,” Australian Treasurer Josh Frydenberg said in a public statement. “This year will see a surplus of A$7.1 billion (US$5 billion). A A$55.5 billion (US$39.2 billion) turnaround from the deficit we inherited six years ago.”
If current economic performance continue, the government predicts further surpluses of A$11 billion in the 2020-21 financial year (FY21), $17.8 billion in FY22, and $9.2 billion in FY23.
“A total of $45 billion of surpluses over the next four years,” the treasurer said. “Surpluses will continue to build toward 1 percent of GDP within a decade.”
“Well what are you doing about that?”
— Sunrise (@sunriseon7) April 2, 2019
Commodities, Taxes Drive Surplus
The latest surplus was mainly driven by soaring commodity prices and higher corporate taxes, two years after the then Turnbull government withdrew a proposal to reduce the corporate tax rate by 5 percent to 30 percent.
Business transactions have largely offset declines in other areas of economic activity, with tax receipts expected to fall A$15 billion (US$10.6 billion) over four years due to weakening household consumption, property investment, and average wages.
“In the near term, however, this impact will be more than offset by an increase in company tax collections in 2018-19 and 2019-20, reflecting the recent observed strength in commodity prices,” the budget papers said.
Growth Through High Taxes
Reserve Bank of Australia Assistant Governor (Economic) Luci Ellis on March 26 highlighted the federal government’s fiscal growth strategy of high taxation at the Housing Industry Association in Sydney.
“In the past year, taxes paid by households increased by around 8 per cent, more than double the rate of growth in gross household income of 3.5 per cent,” she said.
Prime Minister Scott Morrison is leading the “biggest-spending and highest-taxing government Australia has ever seen,” according to Mannkal Economic Education Foundation Research Analyst Cian Hussey.
“A decade of fiscal mismanagement, from both major parties, has resulted in an enormous public debt that the Coalition is not serious about paying down,” she told The Spectator. “Tax receipts have boomed in recent years, but higher levels of spending rather than being used to reduce the debt are matching them just as quickly.”
Disability Funds Added
The budget might have also been boosted by an underspent National Disability Insurance Scheme (NDIS), according to Every Australian Counts, the National Disability and Carers Alliance’s (NDCA’s) grassroots campaign for the NDIS.
The campaign estimates between A$1.6 billion (US$1.1 billion) and A$3 billion (US$2.1 billion) of money that was originally allocated to the scheme went straight back to the government and boosted the latest budget’s bottom-line.
The revelation has outraged disability advocates who say the NDIS, administered by the federally funded National Disability Insurance Agency, has been underspent since the scheme’s inception in the year 2016.
“NDIS funds must be spent on the NDIS–not bolstering the budget bottom line,” NDCA chair Leah van Poppel said in a public statement. “Funds tagged for the NDIS should be spent on the NDIS. The underspend should be used to support people with disability and their families and fix up problems with the scheme–not returned to government coffers.”
The NDIS budget is often underspent due to long wait times to receive financial support from the scheme. Some disabled people are waiting two years for a wheelchair, according to NDCA.
“Most people in the NDIS are not spending all the funding allocated to them because they cannot work their way through the bureaucratic maze that is the NDIS to get the help they need. They are desperate for help and support–they just can’t get it,” van Poppel said. “The NDIS must run like a real insurance scheme where money not spent is put away for a rainy day or invested back into the scheme to get it working the way it should.”
This year’s federal budget is a bit like the curate’s egg, good in parts. The Conservative Party’s South Australian Senate candidate @RikkiLambert looks at what the 2019 Budget means for South Australia. #auspol #ausvotes #ausvotes2019 #BringBackCommonSense #Budget2019 pic.twitter.com/kb5KJtc2NC
— Aust Conservatives (@AuConservatives) April 2, 2019
Tax Cut Starts at $1 a Week
Frydenberg also announced tax cuts for about 10 million Australians but only if the Liberal Coalition is re-elected at the general election in May.
People earning up to A$18,200 (US$12,845.92) a year will pay no income tax, while those earning between that amount and up to A$37,000 (US$26,116.22) will receive a A$55 (US$38.82) tax cut in FY20 or about A$1 (71 US cents) a week.
Those earning between A$37,000 (US$26,116.22) and A$48,000 (US$33,879.48) will receive a A$190 tax cut, or about A$3.70 (US$2.61) a week.
People making between A$48,000 (US$33,879.48) and A$90,000 (US$63,525.45) will have a A$550 (US$388.23) tax cut or A$10.60 (US$7.48) a week.
“Taxpayers will be able to access the offset after they lodge their end of year tax returns from 1 July 2019, which is in just 13 weeks’ time,” Frydenberg said.
However, Hussey questions why politicians accepted a pay rise even though net government debt jumped from nearly 6 percent of GDP to over 25 percent between FY09 and FY19.
“Astonishingly in 2012 they were given two rises, one for 31.3 per cent and another for 3 percent just four months later,” Hussey said. “That politicians can receive pay rises while delivering such poor budgetary outcomes is absurd. To do their bit in assisting the budget, their pay should be frozen after delivering multiple budget deficits.”
She estimates that even after freezing politician wages from the year 2009 their wages would this year be twice the average salary of working Australians.