Home Australia Devil in the detail: What the $7.1 billion Budget surplus hides

Devil in the detail: What the $7.1 billion Budget surplus hides

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The Australian government has promised to deliver a surplus of $7.1 billion next year, pay off all debt in a decade, and provide tax cuts and cash handouts to most citizens if it wins the election next month.

On Tuesday night, Treasurer Josh Frydenberg delivered his first federal budget, featuring the first surplus in 12 years.

But the unveiling of the controversial plan has come as a huge blow to the welfare sector amid revelations it has been poised to prop up the surplus.

The Government predicts it will save $28 billion on “parameter variations” — which includes substantial cuts to the sector.

The largest single cut of $2.1 billion over five years will be saved by redesigning the way welfare recipients report their income, according to Budget papers.

From July 1 next year, the single touch payroll system currently used by the Australian Taxation Office will be extended to reporting income for social security purposes.

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It will eliminate the need for recipients to estimate their next fortnight’s income — which determines their payment — and avoid being overpaid and then chased for repayment, according to the government.

“This measure will assist income support recipients by greatly reducing the likelihood of them receiving an overpayment of income support payments (and subsequently being required to repay it),” the budget papers say.

According to historical data, government officials report 1 per cent of recipients receive an overpayment and 0.8 per cent receive an underpayment each fortnight.

More controversially, the Budget also stipulates that the $1.6 billion that wasn’t spent by the National Disability Insurance Scheme (NDIS) last year won’t be included for 2019-20. It will instead deliver an immediate boost to the budget bottom line.

Disability advocates have argued that the slower than expected uptake was a result of people having problems accessing the scheme and had hoped that the money would be injected back this year.

National Disability and Carers Alliance chair Leah van Poppel said NDIS funds “must be spent on the NDIS — not bolstering the budget bottom line”

Greens spokesman on disability services, Jordan Steele-John, said about 23 per cent of the government’s projected $7.1 billion surplus comes from cutting the NDIS, The Guardian reports.

“The Treasurer says we’re back in the black, but that surplus is built on the backs of disabled people,” he said.

“That’s sick.”

Mr Frydenberg pushed back against criticism that the government’s surplus was built on huge underspending in the NDIS.

“It is a demand-driven program and as of the end of last year there were 250,000 people who were in the NDIS, 78,000 of whom hadn’t received disability support before, and it is going to 460,000,” he said.

“Everybody who is in the NDIS is fully funded through this government and through this budget. We will meet every cent of our commitment to the NDIS.”

Also included in the Budget are cash payment savings of $1.4 billion over four years coming from lower than expected payments in the income support for seniors program.

Mr Frydenberg said the surplus will depend on factors outside the Government’s control, including the global economy.

He also argued that wages, which have stagnated in recent years, are picking up compared to this point last year.

But opposition treasurer Chris Bowen said the Coalition had over-estimated wage growth in every single budget it had handed down.

“The treasurer changes from budget to budget, it seems. But the fact that they don’t meet their wages forecast doesn’t change,” Mr Bowen told ABC’s Insiders.

Mr Bowen said if Labor wins the May federal election the party will do its own version of the budget shortly afterwards.

“If we win, we will bring down a major economic statement in the third quarter of the year, which will in effect be the first Budget of a Shorten Labor government,” he said.

“We need to reset the economic settings. We need to update the forecasts with the new government in place.”

Prime Minister Scott Morrison said he hopes the Budget will be positively received by voters whom he will ask to re-elect his conservative Coalition for a third three-year term. Mr Morrison is expected to announce within days that an election will he held on May 11 or May 18.

The government expects surpluses to grow annually to $17.8 billion in 2021-22 before slipping to $9.2 billion the following year as tax cuts take effect on government revenues.

Net debt would peak at $373 billion in the current fiscal year — at 19.2 per cent of GDP — and be paid off by 2029-30.

Mr Frydenberg described proposed income tax cuts as the largest since Australia’s mining boom years before the global financial crisis in 2008. The cuts, which include lowering the 32.5 per cent tax rate to 30 per cent from July 2024, are forecast to cost the nation’s coffers $158 billion in tax revenue by 2030.

The Budget strategy has to be endorsed by parliament to become law. But the government does not propose to get much of its economic blueprint through parliament before the next election, which opinion polls suggest the Labor Party is likely to win.

Mr Frydenberg said he will try to pass legislation this week that would give $284 million to pensioners in one-off payments by July to help pay soaring energy bills.

He said voters must decide at the election between the low-taxing conservatives and high-taxing and high-spending Labor.

“There’s a clear contest in this election between one side of politics which wants to reduce taxes and the Labor Party which will try and increase taxes,” Mr Frydenberg said.

The opposition treasury spokesman said Labor would go to the May election promising bigger surpluses than the ruling coalition.

“Based on the figures we’ve seen tonight, we would have a better bottom line … paid for by a whole range of policies,” Mr Bowen told Sky News TV.

The Coalition delivered annual surplus budgets for a decade before the global financial crisis struck during a Labor government’s first year in office. Labor ran up debt through stimulus spending and avoided a recession. But Labor’s failure to curb debt during six years in office damaged the party’s economic credentials.

If opinion polls are correct and Labor wins the next election, Mr Morrison would become the sixth Australian prime minister since 2007 to fail to last an entire three-year term.

Labor has said if it wins the election, it will outline its own economic blueprint before September.

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