Federal Budget 2018-19: An appeal to voters

— WE 

Tom BuchanLauren Nowak, Natalie Hasapaki, Sasha Fox, Scott Newstead

This evening we saw an upbeat Federal Treasurer, Scott Morrison, bringing down his third federal budget with untempered optimism. And really, who wouldn’t be smiling after receiving an extra $10 billion in total tax receipts to solve Australia’s financial problems?

Make no mistake – this is an election budget.

As the last budget before the next federal election, it does not disappoint the voters with a swag of new tax and spending initiatives, plus the brought forward (to surplus) budget repair targets. The budget is forecast to return to a ‘modest balance’ of $2.2 billion in 2019-20, and increase to a projected surplus of $11 billion in 2020-21.

According to the Treasurer, the 2018-19 ‘election budget’ is focused on ‘building a stronger Australian economy’. In our view, it has been solidly constructed with two substantial pillars: tax cuts and infrastructure investment.

Tax cuts

For Australians on low-middle incomes, they are set to save between $200 and $530 a year at tax time through a tax offset commencing 1 July 2018. A flat tax rate of 32.5 per cent for those earning between $41,000 and $200,000 per annum will come into effect from 1 July 2024, with the 37 per cent tax rate being scrapped completely.

The Treasurer confirmed the Medicare levy will remain unchanged at 2 per cent providing further relief to taxpayers. In addition, the Treasurer highlighted the Government’s policy of setting a ‘speed limit’ on tax a 23.9 per cent to GDP cap.

Infrastructure investment

A massive $75 billion rolling infrastructure plan will continue, focusing on major road and rail projects across Australia including: CBD to airport links, inland freight rail, regional and local rail works and a new urban congestion fund. All states and territories are represented in this investment.

Further to this, $2.4 billion is to be invested in public technology infrastructure including super computers and satellite technology.

Splashing that cash

It is clear this budget has been deliberately constructed to appeal directly to the Australian electorate, with an emphasis on aged care and health initiatives.

Aged care

This is already the largest single item in the budget representing the largest single category of total spending set to grow by:

  • - Increasing the Pension Work Bonus to allow aged pensioners to earn an extra $50 per fortnight, or $1300 a year without reducing their pension
  • - Increasing the number of home care places – $1.6 billion to support 14,000 additional high‑level home care packages by 2021‑22
  • - Providing $146 million to improve access to aged care services in rural, regional and remote areas
  • - Dedicating $83 million for mental health services in residential aged care facilities


Approximately $3,000 per Australian is spent annually on health and this figure is only growing with these new initiatives:

  • - Extension of the PBS by $1.4 billion for medicines to address, breast cancer, refractory multiple myeloma, multiple sclerosis and a drug for the prevention of HIV
  • - Dedicating $154 million to promote active and healthy living
  • - Providing $125 million over 10 years for Lifeline Australia from the Medical Research Future Fund
  • - Boosting the Medical Research Future Fund by $500 million over 10 years
  • - Delivering $83.3 million over five years for stronger rural, regional and remote health outcomes

In addition, the Treasurer announced a number of initiatives set to keep us safe, reduce our bills and help boost business including:

  • - National energy guarantee: to see annual power bills to fall by an average of $400 a year to 2020
  • - National security: a total of $294 million for security at the airports including $122 million to increase border force capability at nine domestic and international airports, $50 million to - upgrade security infrastructure and $122 million to enhance screening of inbound air cargo and international mail
  • - Education: an additional $24.5 billion over the next 10 years to needs-based funding for schools
  • - Industry assistance: extension of the $20,000 instant asset write off for businesses with a turnover of up to $10 million
  • - ATO: A crackdown on the black economy
  • - Superannuation: banning of exit fees on superannuation accounts for members changing funds and limiting fees on accounts under $3000 to 3 per cent

Bold assumptions?  

The Treasurer appears to be erring on the side of optimism in some of the economic forecasts underpinning the budget:

  • - Economic growth: expected to increase from 2.75 per cent in the current year to 3 per cent in 2018-19 and following year
  • - Unemployment rate: falling from 5.5 per cent in the June quarter of 2018 to 5.25 per cent in the June quarter of 2019
  • - Wages growth: increasing 2.25 per cent in the June quarter of 2018 rising to 3.25 per cent in the June quarter of 2020

In the last five years, wages have only grown on average by no more than 2 per cent each year. So the brought forward budget repair forecasts of a small surplus of $2.2 billion in 2019-20, followed by further surpluses up to the year 2021-22 are dependent on the ‘stronger economy’ the Federal Treasurer is envisioning.

A national direction? 

Does this Federal Budget give the nation a clear direction for the future? Or is it a benign economic/political plan for re-election?

Some economic commentators will say this budget lacks courage, and shies away from the nation’s most urgent financial challenges: Introducing genuine tax reform to reduce the dependence on personal income taxes (50 per cent of total revenue and rising) and attacking with resilience Australia’s monumental national debt - over $650 billion accumulated debt and rising.

Perhaps the budget is premature in anticipating imminent recovery and in Morrison’s words, a ‘stronger economy’.

We hope the Treasurer is accurate in his assumptions and forecasts leading to continued rising employment, falling unemployment, and improving national income per head benefiting all Australians.

We shall see.