Federal Budget 2010

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ECONOMY:

Budget deficit of $40.8 billion, or 2.9 per cent of GDP, down from $57.1 billion in 2009-10.

Growth of 3.25 per cent in 2010-11 and 4 per cent in 2011-12. Unemployment set to fall slightly from 5.25 to 5 per cent. Inflation forecast to decrease from 3.25 to 2.5 per cent. Total government spending of $354.6 billion. A 2.0 per cent cap on real spending growth until surplus reaches 1.0 per cent of GDP

HEALTH:

After hours medical help for all Australians under $417million Medicare Locals program

An extra 23 GP super clinics and upgrades to 425 doctors' surgeries worth $355million

An extra $523m for more nurses

$467m to introduce individual electronic health records

About $2.5bn saved through cheaper medicines and a better pharmacy deal.

FAMILIES:

More low income families will benefit from changes to the Medicare Levy threshold

The threshold for a couple with one child has increased by almost $1500

More than 6m taxpayers will be able to claim an automatic tax deduction of $500 in 2012-13 rising to $1000 the following the year as the tax system is simplified.

A boost to the Healthy Children program will see Victoria get $7.8million in 2011-12, rising to $23.5million in 2013-14

VICTORIA:

Short-changed relative to other major states.

Almost $300m for major infrastructure projects

More than $100m for bushfire relief in the wake of Black Saturday

State coffers got $11.2bn in GST revenue - an extra $54m on forecasts

GST return of less than 94 cents in every dollar spent in Victoria.

TAX:

Third round of tax cuts from July 1.

Will lift the tax free threshold to $16,000 and 30 per cent threshold to $37,000.

Second highest marginal tax rate is cut from 38 to 37 per cent.

Dual income family with two children that earns $87,000 will be $2100 better off.

Henry Review measures adopted, including company tax rate reductions from 30 to 29 per cent in 2013-14 and 28 per cent in 2014-15.

Tobacco excise has been increased by 25 per cent.

SPORT:

A four-year funding boost of $325 million for community and elite sport.

Comprises $237 million for elite sport, including $52 million for the Australian Sports Commission's high performance programs and $62 million for the Australian Institute of Sport.

Funding for development of 112 national coaches, direct support for up to 665 athletes, and to identify talent. Australian Paralympic Committee to get $16 million. At grassroots level, $71 million to provide training for 45,000 coaches and officials.

CHILDCARE:

Childcare rebate to be capped at $7500 a year for each child, for the next four years - impacting 26,000 families and clawing back $86.3 million.

Cuts will fund part of a $273 million package to set up a new National Quality Framework and rating system for childcare and early education services.

New guidelines to ensure large childcare providers prove they are financially viable after ABC learning debacle.

Total childcare investment over four years set at $14.4 billion.

TRANSPORT/INFRASTRUCTURE:

More than $200 million for Victorian councils to maintain and upgrade roads and other council facilities.

Spending of $142 million for Albury-Melbourne-Geelong-Ararat freight rail route.

About $150 million of promised money for western ring road and western freeway upgrades brought forward.

A new $5.6 billion national infrastructure fund over 10 years for roads, rail and ports, with most money for resource-rich states.

DEFENCE:

Total defence spend of $25.7 billion.

A $1.2 billion package to boost border and aviation protection, including $101m for passport security.

A $2.2 billion boost for war in Afghanistan.

Extra $200 million aviation security.

500 new AFP officers and 6000 new defence recruits.

About $37 milion for work at Puckapunyal.

JOBS/SKILLS:

About $660 million to boost skills and prepare more Australians for jobs.

Includes a $200 million Critical Skills Investment Fund to provide up to 39,000 extra training places in areas of high skills demands.

A $79 million extension of the Apprentice Kickstart program for about 22,500 new apprentices, with a $3350 bonus payment to employers for each apprentice.

Unemployment to fall from 5.25 to 5 per cent.

TERRORISM:

A $9.7 million package to identify and protect against homegrown terrorist threats.

Includes projects to divert people at risk of violent extremism, and money to support "de-radicalism programs".

Mentoring programs for 'at risk' youth to be set up, and a closer look at the internet's role in radicalisation.

A $9.1 million Counter Terrorism Control Centre to be established.

IMMIGRATION:

About $1bn to process and detain boat people over the next 12 months, including $282 million for new and upgraded detention facilities such as Curtin and Christmas Island.

The number of new migrants allowed to settle in Australia to remain unchanged at 168,000.

The total number of skilled migrants will rise by 5750 to 113,850.

About 8800 boat people could be processed in 2010-11.

INDIGENOUS AFFAIRS:

National Indigenous Television to get $15.2 million.

A $46m package to improve remote service delivery.

Programs to tackle petrol sniffing expanded worth an extra $38.5 million.

An extra $34.9m over four years for Indigenous legal services.

EDUCATION:

Vocational Education and Training to get $243 million over four years.

New website MySkills to be set up from 2011 to help people choose a VET provider.

A $120 million package to boost adult literacy to give up to 140,000 Australians skills to get jobs.

A $23.5 million national adult literacy and numeracy strategy to be developed.

ARTS/HERITAGE:

A $17.7 million boost over four years for historic sites.

Safety concerns on Kokoda Track to be addressed with a $3.1 million program.

Australian Maritime Museum to get $8 million.

Film industry tax offsets changes to encourage investment in Australia.

Caring for our Country program cut by $81 million over four years.

LAW AND ORDER:

An extra $92.3 million over four years for legal aid.

A $26.8 million package for community legal services programs.

$38.5 million to combat organised crime in Australia including $24m to track fraud.

A new Criminal Intelligence Fusion Centre to look at people smuggling prevention.

Cuts to number of Family Court judges will save $10 million.

CLIMATE CHANGE/ENVIRONMENT:

A new $652 million renewable energy future fund to support wind, solar and biomass projects, with money was saved from shelving the ETS until 2013.

$30 million over two years to educate public on climate change science.

Cuts to green cars worth $200 million.

$23 million to reduce waste and boost recycling.

About $12 million over two years to protect Great Barrier Reef.

SUPERANNUATION:

In response to the Henry Review super payments will gradually increase from 9 to 12 per cent starting in 2013

The Government will contribute $500 in super for workers on incomes up to $37,000 from 2012

Workers aged 50 or over will super balances below $500,000 can make one-off payments of up to $50,000 into their super.

RURAL:

Almost $400million for drought-ravaged farmers under extension of Exceptional Circumstances program

The program will also prop up small rural businesses in drought areas

Plan to overhaul relief, moving towards a risk management system

Farmers will benefit from a $1billion package to improve rail freight networks.

COMMUNICATIONS:

About $15m over four years for National Broadband Network support.

$24m to design NBN regulations

Regional communities to get better TV reception through a $375m 12-year package to help with the upgrade to digital TV

New subsidies of up to $700 for households in remote communities needing to access new satellite service.

VETERANS:

About $153m over five years to help veterans with chronic health care problems stay out of hospitals

About 2700 men exposed to radiation during British nuclear testing to get access to pensions and health care package worth $36m

Up to 3000 men who worked inside the fuel tanks of RAAF F-111 jets can get compensation and health care under a $55m plan

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TIM COLEBATCH
May 12, 2010

GOOD resolutions make for boring budgets. The big story in this budget is not what it does, but what it doesn't. It doesn't have tax cuts. It doesn't have much new spending. It doesn't even have much in spending cuts.

In Treasurer Wayne Swan's words, the budget ''produces an economic and fiscal position the envy of the developed world''.

This budget doesn't give and it doesn't take. More than any other budget I've seen, it leaves things as they are. And that's the reason it is able to forecast a return to surplus by 2012-13, three years earlier than previously forecast.

Leaving things as they are delivers two benefits to the bottom line. First, it means stimulus spending programs are allowed to run out without being replaced. That's the main reason Canberra's spending as a share of GDP is forecast to shrink from 26.2 per cent of GDP now to 23.8 per cent in 2012-13.

Second, leaving things alone means there are no tax cuts - and so bracket creep brings home the bacon. Taxes will rise from 20.2 per cent of GDP to 22.5 per cent in the same three years, primarily because incomes will rise but income tax thresholds will not. Without any formal tax increase, Australians will pay a higher share of their income in tax.

Income tax on individuals, now at a 40-year low as a share of GDP, is forecast to climb from $120 billion this financial year to $174 billion in four years - a rise of 45 per cent. Part of that is because we are forecast to have almost a million more jobs by then. But the main reason is that our wages are forecast to rise roughly 4 per cent a year, and with no tax cuts apart from the long-scheduled nip and tuck from July 1, that means with each year a higher share of our income is in our highest tax bracket.

Unfair? No, I think that's very fair. It's in our interests to get the budget back in the black as soon as is feasible, and anyone who says we can do it just by cutting spending should spell out where he (it's usually guys sounding off this way) would cut another $36 billion a year from spending. I'll bet it's not from spending on him or the interest groups he represents.

In fact, with GDP itself forecast to grow reasonably fast - 28 per cent in those four years, or 14 per cent excluding inflation - that would still leave the taxman taking just 10.5 per cent of GDP off us in personal income tax in 2013-14. That's well below the 25-year average of 12 per cent of GDP from 1980 to 2005.

The return to growth would see company profits soar, so tax on them would rise 47 per cent in four years. And the proposed resources tax on the miners would add its bit, though mostly after we are already back in surplus.

The bottom line in all this is the Rudd government's political calculation that it is more vulnerable to attack for spending too much than too little, so it has made restoring the surplus its first priority. Everything else can wait.

There is no money in the forward estimates any more for an emissions trading scheme - not even in 2013. It is now government policy in principle only, with no commitment to putting it into practice.

There are a few fiddles here. To make the coming year's budget deficit look smaller, Team Rudd has pulled $1.5 billion of grants for roads and local government into the dying weeks of 2009-10, exaggerating the improvement in next year's budget balance.

It has ripped more than $1 billion out of the forward estimates for foreign aid. While it is still committed to lifting Australia's development programs to 0.5 per cent of our national income by 2015-16, more than two-thirds of the work has been left for the last four years. One may well ask whether that is another Labor promise halfway to being abandoned.

The biggest budget saving, apart from abandoning emissions trading, is $1.9 billion saved by slashing payments under the Pharmaceutical Benefits Scheme to manufacturers.

The Government has also cut $840 million from its future superannuation co-contributions for lower-income earners. Does it see the scheme now as a bit of rort for the families of the well-off?

But that's all the bad news for ordinary folk. What about the good news?

Well, that's the problem. There's really not much positive news to take out of this budget, apart from the fact that, in an election year, it is a very restrained document that sets Australia up to be back in the black by 2012-13. That is its real achievement.

The budget completes the government's response to the Henry review by introducing a 50 per cent discount on up to $1000 of interest income from bank savings, and by allowing ordinary taxpayers to opt for a standard $1000 tax deduction for work-related expenses without having to fill out all the details.

Given that the average work-related expenses are about $2000 per taxpayer claiming them, that offers a good deal for people who make small claims, while leaving those with bigger expenses to keep filling out the forms.

The savings tax break is a good first step towards Ken Henry's goal of levelling the playing field for taxation of savings, but it is just the first step. A discount rate of 50 per cent, applied to investment income and losses alike, would go a long way to improve the taxation system.

By halving the tax break for negative gearing, it would also greatly improve the Australian housing market, incentives for productive investment, and the prospect of younger and less wealthy Australians being able to own their own home.

In ruling out reform, Labor has failed hundreds of thousands of people who voted for it.

The best thing about this budget is its restraint.

By refraining from tax cuts or new spending, Labor has allowed fiscal policy to play its part in getting policy settings back to normal. That will relieve the pressure on interest rates, and maybe our overexcited Reserve Bank now will also settle for a bit of welcome restraint

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As my dear friend often states, 'it's nothing but ink on paper'

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As my dear friend often states, 'it nothing but ink on paper'

Yep, time will tell. The Liberals won't like this budget one bit