Author Topic: Budget 2019  (Read 5008 times)

Bloop Bloop

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Budget 2019
« on: April 02, 2019, 03:57:18 AM »
Well, it's not really a budget is it, because it's only going to be implemented if the Libs win, which they probably won't.

But what I love about this budget is that it locks in tax cuts across the board. Poor, middle or rich, you get a tax cut, at some stage.

What this does too is it commits Labor to (1) matching the tax cuts for poor/middle income earners - that's great, everyone can benefit from paying a little less tax and (2) it prevents Labor from hiking the tax rates too highly on high-income earners, lest they be accused of soaking the rich.

So I think what the Libs have done very well is set the stage for some (much-needed) reform of our personal income tax rules, which currently are the second-highest in the OECD in terms of income tax:GDP ratio. Time we cut that down a little bit.

What are your views on the budget/budget reply (when it happens)? Will the tax cuts help you to retire a little bit earlier?

middo

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Re: Budget 2019
« Reply #1 on: April 02, 2019, 04:18:50 AM »
I can't see the budget helping me retire any earlier.  I thought Josh sounded like he was presenting a Labor budget from the spin on it, but ultimately the changes already forecast by Labor on negative gearing and dividend imputation, and actually doing something about global warming has my vote.

marty998

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Re: Budget 2019
« Reply #2 on: April 02, 2019, 02:28:40 PM »
I thought it was pretty ordinary. I don't like the idea of announcing tax cuts 6 or 7 years in advance. A budget should be for the next year, not the for the financial year two elections hence. It's almost as if they didn't have enough time to put it together...

Frydenberg is relying on some heroic maths. Consider net debt is going to be $360bn this year and that surpluses are projected to be $45bn cumulative over the next 4 years (assuming wages return to 3.5% growth which hasn't happened the last 6 budgets).

That means for net debt to be zero by 2030, there needs to be surpluses of $45 billion every year for 7 years from 2024, and this is when the impact of major tax rate changes will start to hit the budget.

And after all the media leakage and bluster that "we're already in surplus", the outcome for 2019 is still projected to be a deficit of $4bn.

Bloop Bloop

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Re: Budget 2019
« Reply #3 on: April 02, 2019, 02:41:48 PM »
That is a good point. The projections are very rosy. And by relying on rosy projections, he lets Labor have the benefit of the same projections (plus even more money with the NG/CGT/franking credits windbacks).

Todge

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Re: Budget 2019
« Reply #4 on: April 02, 2019, 06:15:13 PM »
Yep, surplus (however small) next year is probable. Beyond that and we in speculation territory. It's really a budget that dangles a carrot: vote for us and you get this (unless economic headwinds means you don't).

Both sides offer too little and smack of short-sightedness, rather than a clear view of how the country needs to change. Both sides are basing revenue forecasts on things that economic history suggest are unlikely to be realised in full.

middo

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Re: Budget 2019
« Reply #5 on: April 02, 2019, 07:03:26 PM »
Leigh Sales questioned Freidenberg about his "surplus" - how it is forecast, not current, and Josh blustered through it.  She also asked why his forecast surplus was any more likely than Wayne Swans.  Because.... was the answer.

Todge

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Re: Budget 2019
« Reply #6 on: April 02, 2019, 07:46:08 PM »
Yep, lots of things need to go right to that 7bn figure to be realised. Budgets are always based on assumptions. It really comes down to whether this one is enough to swing the public and put the coalition ahead.

Bloop Bloop

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Re: Budget 2019
« Reply #7 on: April 02, 2019, 08:02:20 PM »
What I don't understand about economic management is why it's even important to keep us out of a recession anyway.

MMM principles dictate that consumption for the sake of consumption (or economic growth) is a bad thing. Let the market sort itself out, let bloated sectors die off and then we will all be better off in the long run.

middo

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Re: Budget 2019
« Reply #8 on: April 02, 2019, 08:10:11 PM »
What I don't understand about economic management is why it's even important to keep us out of a recession anyway.

MMM principles dictate that consumption for the sake of consumption (or economic growth) is a bad thing. Let the market sort itself out, let bloated sectors die off and then we will all be better off in the long run.

A recession hits the budget bottom line heavily.  Less tax revenue, more expense on welfare.

And the market doesn't really sort anything out.  It needs regulation to work properly.

I think your views on this are simplistic.

Todge

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Re: Budget 2019
« Reply #9 on: April 02, 2019, 10:47:24 PM »
I've lived through a few recessions here and overseas. Not fun but my job was never in danger so I maybe saying I loved through one is false. But there are recessions and there are recessions. Some are mild, others very painful.

At the moment Australia has high household debt, high government debt and already low interest rates, so the measures government can impose under neo-classical economics become more constrained. This could lead to a prolonged period of stagnation or stagflation. Nobody wants that, that would be painful. A loss of that kind of productivity will take along time to make up. Some areas will never fully recover.


Bloop Bloop

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Re: Budget 2019
« Reply #10 on: April 04, 2019, 08:04:53 AM »
I'm fine with stagnation. It's a lot better than the rampant inflation we were having in the 2000s - I remember prices of everything, not just housing but all consumer items, were going up a huge amount every year and wage increases of 4-5% a year were just completely out of control. You don't want an inflationary spiral.

Under the old regimes you had unproductive industries like Australian auto manufacturing surviving solely on government largesse.

What do people think of Shorten's budget reply? I thought it was pretty interesting, fairly predictable but he's hit on some good points like the cancer funding.

I'm glad that either way, earners on $20k to $90k will be getting very significant tax relief. This helps low earners like my partner. I'm also glad that both parties are generally looking at a lower taxing future, to reverse some of the pernicious effects  of bracket creep. Even if Labor gets in, the top marginal rate looks to either be only temporarily increased or not increased at all, meaning that everyone is likely to be slightly better off regardless of who gets in power.

 

marty998

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Re: Budget 2019
« Reply #11 on: April 04, 2019, 02:40:23 PM »
I'm fine with stagnation. It's a lot better than the rampant inflation we were having in the 2000s - I remember prices of everything, not just housing but all consumer items, were going up a huge amount every year and wage increases of 4-5% a year were just completely out of control. You don't want an inflationary spiral.

Under the old regimes you had unproductive industries like Australian auto manufacturing surviving solely on government largesse.

What do people think of Shorten's budget reply? I thought it was pretty interesting, fairly predictable but he's hit on some good points like the cancer funding.

I'm glad that either way, earners on $20k to $90k will be getting very significant tax relief. This helps low earners like my partner. I'm also glad that both parties are generally looking at a lower taxing future, to reverse some of the pernicious effects  of bracket creep. Even if Labor gets in, the top marginal rate looks to either be only temporarily increased or not increased at all, meaning that everyone is likely to be slightly better off regardless of who gets in power.

The additional spending Labor is proposing is neither here nor there all things considered... a few billion over the four year forward estimates when the government is going to be spending close to $2 trillion in that time.

What does make a difference is the Liberals' 2024 tax plan. Pretty obvious that is on par with the 2004-2006 largesse which baked in the structural deficits we've seen for the past 12-13 years.

Much as I would benefit from the Liberal plans over Labor, I don't think it is responsible fro a budget point of view at this point. Once the surpluses start hitting $20-$30 billion, then the country can afford it.

Bloop Bloop

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Re: Budget 2019
« Reply #12 on: April 04, 2019, 05:36:29 PM »
Although we've had structural deficits, we're still very close now to surplus, so the Howard tax reforms seem to have been on, or very near to, the mark. Without them, we'd have massive rolling surpluses with nowhere to put it. I'm a big believer in letting people keep more of their own money, subject to government still providing basic services, which it does.

middo

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Re: Budget 2019
« Reply #13 on: April 04, 2019, 06:02:33 PM »
Although we've had structural deficits, we're still very close now to surplus, so the Howard tax reforms seem to have been on, or very near to, the mark. Without them, we'd have massive rolling surpluses with nowhere to put it. I'm a big believer in letting people keep more of their own money, subject to government still providing basic services, which it does.

I can't agree with this.  The idea that the mining boom and commodity prices will remain high, that coal will continue to deliver rivers of gold to the Federal Government, is just wishful thinking.  The budget numbers for wage growth are also concerning compared to what has been happening.  We don't have massive surpluses, and John Howard gave away the few brief years of sunshine, not in useful expenditure like infrastructure or education, but wasted on middle class welfare.

If you personally were given unexpected sums of money this year and next, would you hand it out to your kids, or save it for the future?  Howard and Costello made the choice to give it away, and also tied up future governments.  We are still dealing with that lack of vision.

Bloop Bloop

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Re: Budget 2019
« Reply #14 on: April 04, 2019, 08:17:22 PM »
The point is, so far so good. And if revenue dries up in future, we are at or near an equilibrium, and have multiple ways of turning the taps off. Your position is that any future shortfalls ought to be averted via continued high rates of income tax. My position is that if any such shortfalls occur, there are myriad ways of making up revenue, and in the meantime we can do something to revert our income tax levels back to a more OECD competitive rate.

The truth is we don't raise a lot of non-income/company tax relative to OECD countries, so if we need more revenue at a later stage, a GST hike to 12.5% is an easy way to d it.

I'm not sure that letting people keep more of what they themselves earn is a 'waste', either.

Comparing a MMM budget to a government budget relies on the premise that a government's main aim is to redistribute earned wealth in accordance with future needs. I'm not saying that's invalid, but it's a political premise. My own political premise is that a government ought to redistribute only enough to keep society functioning. No doubt the voters can decide where in this spectrum the government lies.

deborah

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Re: Budget 2019
« Reply #15 on: April 05, 2019, 05:07:21 PM »
In 1900 the two wealthiest nations (in one method of accounting such things) were Australia and Argentina. By a similar method of accounting, Australia is still on top, and Argentina is nowhere near it. Squandering our windfalls is one way for us to replicate Argentina's demise.

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Re: Budget 2019
« Reply #16 on: April 05, 2019, 05:13:48 PM »
Did anyone notice that the budget is good for the early retiree? From what I have read (not much as I was out of news range during the vital days when everything is explained), they are increasing the age that you can add to super without working, so you have longer after preservation age to add money, and they are also increasing what you can add as a catch up. It makes sense to increase the age, to aged pension age, so I expect that will be passed no matter who is in power.

marty998

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Re: Budget 2019
« Reply #17 on: April 05, 2019, 05:29:01 PM »
Did anyone notice that the budget is good for the early retiree? From what I have read (not much as I was out of news range during the vital days when everything is explained), they are increasing the age that you can add to super without working, so you have longer after preservation age to add money, and they are also increasing what you can add as a catch up. It makes sense to increase the age, to aged pension age, so I expect that will be passed no matter who is in power.

I don't know that it is good for the early retiree... it is definitely not bad, but I'd suggest playing around with super contributions at 65 and 66 is not going to be here nor there for early retirees.

The point is, so far so good. And if revenue dries up in future, we are at or near an equilibrium, and have multiple ways of turning the taps off. Your position is that any future shortfalls ought to be averted via continued high rates of income tax. My position is that if any such shortfalls occur, there are myriad ways of making up revenue, and in the meantime we can do something to revert our income tax levels back to a more OECD competitive rate.

The truth is we don't raise a lot of non-income/company tax relative to OECD countries, so if we need more revenue at a later stage, a GST hike to 12.5% is an easy way to do it.

I'm not sure that letting people keep more of what they themselves earn is a 'waste', either.

Comparing a MMM budget to a government budget relies on the premise that a government's main aim is to redistribute earned wealth in accordance with future needs. I'm not saying that's invalid, but it's a political premise. My own political premise is that a government ought to redistribute only enough to keep society functioning. No doubt the voters can decide where in this spectrum the government lies.

GST goes to the states, even though it is collected by the feds, so raising it to 12.5% isn't going to do anything, except make the states lazier by not taxing mineral resources as much as they should at extraction point enough (royalties).

The point being made is that the budget is not at break even, equilibrium as you say. We are starting at a deficit of $500 billion of debt.

By all means bring taxes down in future, but only after that $500 billion comes down, and we are not paying $18 billion interest a year.

Bloop Bloop

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Re: Budget 2019
« Reply #18 on: April 05, 2019, 05:52:46 PM »
The problem is that if we agree to wholly postpone tax cuts, there is no guarantee that the deficit will actually be whittled down rather than the status quo continuing. Since future governments will know they have that revenue to play around with.

I'd liken tax to a recurring household expense. The key to frugality is to cut recurring expenses where you can. Be frugal when spending (i.e. collecting) the money of your own citizens, rather than being lavish. I suspect that once we cut taxes, the governments will find a way to keep the deficit manageable, since it will have no other choice.

Every year we fail to cut taxes, we're contributing to an engrained culture of comparatively high personal income taxes. And the more you engrain something the harder it is to remove.

marty998

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Re: Budget 2019
« Reply #19 on: April 05, 2019, 06:01:02 PM »
The problem is that if we agree to wholly postpone tax cuts, there is no guarantee that the deficit will actually be whittled down rather than the status quo continuing. Since future governments will know they have that revenue to play around with.

I'd liken tax to a recurring household expense. The key to frugality is to cut recurring expenses where you can. Be frugal when spending (i.e. collecting) the money of your own citizens, rather than being lavish. I suspect that once we cut taxes, the governments will find a way to keep the deficit manageable, since it will have no other choice.

Every year we fail to cut taxes, we're contributing to an engrained culture of comparatively high personal income taxes. And the more you engrain something the harder it is to remove.

I don't totally disagree here. But lived experience has shown that the Senate is becoming more and more unworkable for a government to do this.

The previous rag tag bunch of cross benchers were happy to block savings but were unwilling to propose any savings. With Labor and Liberal, their savings measures may be unpopular to the other side, but at least they do propose savings measures. They just can't get them passed.

Therefore for the time being, the easiest thing, and probably only thing that could have been done was to leave the status quo and have bracket creep do the heavy lifting.

Vote in a government with a substantial majority, and dealing with a friendly, economically sensible Senate, and you might see some action taken there.

happy

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Re: Budget 2019
« Reply #20 on: April 20, 2019, 04:32:58 PM »
Did anyone notice that the budget is good for the early retiree? From what I have read (not much as I was out of news range during the vital days when everything is explained), they are increasing the age that you can add to super without working, so you have longer after preservation age to add money, and they are also increasing what you can add as a catch up. It makes sense to increase the age, to aged pension age, so I expect that will be passed no matter who is in power.

I don't know that it is good for the early retiree... it is definitely not bad, but I'd suggest playing around with super contributions at 65 and 66 is not going to be here nor there for early retirees.


Well its great for this not so early retiree, as I'm still trying to load my super up to the cap! Many people in their 50s and 60s are still trying to play catchup with their super, not having realised the importance ( or even cared!) it early enough and not having had the benefit of the 9.5% for very long.