Australian Budget 2020

[middo]

I thought I'd open up a discussion about today's budget.

We have done well out of it, receiving substantial tax cuts each.  We will probably fast track work on the house with the extra cash, employing local tradies.

Philosophically I would have preferred to see the tax cuts instead be extra funding to basic science research and support for those out of work.

Please discuss...

[deborah]

Nothing for women. Yet they have been more affected by the pandemic than anyone else. I didn't receive anything, but I wasn't expecting anything either, so I'm not disappointed about it. There doesn't seem to be much substantial in it - it's all fairy floss. No way forward.

[Bloop Bloop]

Generally a good budget. Nice to see more mental health funding. The JobMaker is an interesting subsidy.

Everyone gets a tax cut - due to the LMITO extension and stage 2 acceleration.

I think the Libs have got the strategy right - we were going to have to get into massive debt in order to stimulate the economy, so might as well do it via a combination of direct handouts to the poor (JobKeeper/JobSeeker), stimulatory measures for business, and tax cuts. The tax cuts are there to make sure that the overall Gini coefficient doesn't change too much - otherwise we would become a more equal society. I think our current Gini of around 0.31 is perfectly fine, so the tax cuts are a good recalibration there after so much redistributive largesse.

Labor will wave through the stage 2 cuts and then when stage 3 rolls around in 2024, is Labor really going to repeal them? Sounds like a bit of a tough sell...and even if they do repeal them, stage 2 is baked in, and that means a good "bracket creep" adjustment for all of us earning 45k+.

[alsoknownasDean]

I'm surprised that the JobSeeker rate wasn't increased, especially given how many more people will end up on the $560 per fortnight rate from 1 January.

So if there's incentives to hire people under age 35, does that mean that people may get terminated on their 30th/35th birthday because someone else can do the job for less? These sorts of incentives can have unintended consequences.

Although I'll have to pay a little less tax, so there's that. Probably not enough to really affect my spending/saving habits.

I'll admit I didn't see much about vocational training, but I guess that's probably more of a state responsibility.

[middo]

@Bloop Bloop  you mentioned bracket creep as a justification for the tax cuts.  With wages growth around a couple of percent for the last few yeats, do you really see this as a reason?

[marty998]

Peter Hartcher has the best analysis I have seen so far regarding the budget.

Budgets used to be so simple to understand. Now it’s just madness.

From what I gather this will be the largest transfer of wealth ever from the taxpayer (high income earners), to the private sector (high income earners) via the creation of huge amounts of government debt.

It will eventually be high income earners paying it back (as it always is), probably via a combination of reducing it as a proportion of GDP (inflation) and modest surpluses in a few decades time.

I see it as a leveraged play on Australia - “Oi, you lot! Yes the 25 million of you. Here’s $500 billion, go forth and spend for the good of Queen and Country”.

[marty998]

@deborah its really easy to see how there is nothing in it for certain groups. The ideology of the government is such that the budget should give enough confidence to the economy that your superannuation investment returns will be maintained, so indirectly you benefit.

Labor governments tend to favour the direct path to investment (government grants to specific industries or spending on big programs). It’s easier for the armchair analyst to pass or fail it on outcome.

Liberal governments tend to just hand the country as a whole money and say “you guys deal with it”. It’s somewhat harder to see because there is no specific program to point to that you can say has worked or failed.

[Bloop Bloop]

@Bloop Bloop  you mentioned bracket creep as a justification for the tax cuts.  With wages growth around a couple of percent for the last few yeats, do you really see this as a reason?

Bracket creep hasn't been addressed since 2007 from memory, so yes, I see it as a huge reason to readjust tax brackets.

[deborah]

As only the wages at the very top have been growing, there’s actually been very little bracket creep.

As I said, I didn’t expect anything, and I’m quite happy about that because I have enough. However, my parents also didn’t get anything because they’re also self funded retirees. Their income has taken a hammering, and, if I’d been able to travel, they’d now be part pensioners because the rates were adjusted. Unfortunately they aren’t yet, and I expect that because of the pandemic there would be a lot like them who’ve simply not had the ability to get face to face assistance with the pandemic. In the scheme of things, they’re alive, and as they’re in their nineties, they probably won’t run out of money before they die. However, they’re quite worried about running out and that doesn’t help. Dad was extremely lucky to get a level 4 home care package in March (after waiting three years), but it was difficult to access it because of the pandemic, and they only had a month to do so.

I contend that women over 35 lose out, but as you say, we’ll have to see.

[Bloop Bloop]

That's not true at all. Maybe you meant to say that only real wages at the top have been growing significantly. But nominal wages across all quintiles have been growing at 2% per year. And it's nominal wages which are subject to bracket creep, not real wages. Therefore, as wages grow in nominal figures, the percentage of tax paid rises, which means that real disposable income falls (relative to what it would have been without bracket adjustments).

[deborah]

That may be true for some people, or even for most people, but there’s also a lot of people who have not had a pay rise in a number of years.

[deborah]

https://www.theage.com.au/business/the-economy/no-bang-for-buck-budget-is-big-on-political-correctness-weak-on-job-creation-20201015-p565kc.html

[Bloop Bloop]

I am wary of governments "creating jobs" because it's market distorting by definition. For example we used to  spend a shit ton of money keeping manufacturing local, for no benefit whatsoever other than to the workers whose jobs were saved (and it would have been cheaper just to pay them the dole, plus a generous retraining allowance). The benefit of local manufacturing dying has been continued competitiveness in the car industry which flows on in the form of more money in consumers' hands. No one wanted to buy overpriced Holdens and Fords any more.

[deborah]

Paying businesses to get more people is ok, but this budget doesn’t do that.

To start with, you can write off capital expenditure completely. This will send tax money overseas, as we have no manufacturing. Businesses with high capital requirements also have low numbers of workers, and don’t employ women, so it will not employ many Australians.

The lower taxes are going to the rich who will save them rather than spending them. Again, it won’t employ many Australians.

These are the bulk of the expenses in the budget.

If you wanted to employ more women, you’d sort out aged care.

[marty998]

Yep, agree with the capex comments. It also has the sniff of bullshit accounting about it because it will make the budget balance much better in future years (take the big bath now - billions don’t matter when you’re $215 billion in deficit, but will most certainly matter when doing future year on year graphs).

You’d want to hope that a lot of these capex items are made in Australia and not ... that other country we are not so friendly with right now.