Experts from UNSW Australia Business School have given their independent analysis of the Federal Budget 2018 in a lively roundtable discussion in Sydney's CBD.
Personal income tax cuts gained the biggest headline, after Federal Treasurer Scott Morrison handed down the 2018 Budget, stating that revenue was increasing, and claimed that as a result he'll be able to deliver 140 billion dollars of tax cuts.
Professor Richard Holden said at the start of the round table "It was a political budget, unexciting, sort of boring but good. He delivered a budget with few surprises and forward projections based on an optimistic outlook."
"I think in terms of the core economics of it, the personal income tax cuts are sort of a reasonably good idea. However, they do take seven years to really come into effect so it's pretty far in the future," said Holden.
A return to surplus has also been flagged up as early as next year, and a gradual reduction in net debt.
"I've said many times we don't have a debt crisis in Australia; we have net debt at about 18.5% of GDP – it's one of the lowest in the OECD. What we do have is a structural budget deficit problem, and we have had for some time, and we basically have an issue where tax revenues are growing at sort of 2-3% a year and what we spend money on is often growing at 5-6% a year," said Professor Holden.
"The stuff coming in is growing at half the rate that the stuff going out is, that's going to add up over time. Back in the first Abbott-Hockey budget, there were all of these sort of alarm bells about debt crisis and we're going to be Greece tomorrow. We're not. We'll be Greece in 20 years' time or 30 years' time."
The Federal budget also announced a multi-billion-dollar aged-care and retirees package.
Professor John Piggott from CEPAR looked at the budget implications for aged Australian.
"I think they are all going in the right direction," he says. "This budget does pay some attention to decumulation, to what happens after you retire, and also there is attention paid to what I think of as late life, right – what happens when aged care facilities become a reality in the life course."
Super holders get a cap on fees, super exit fees are banned, and those who are retiring can earn more and add their superannuation fund.
"I think the idea of giving people who don't have too much superannuation at retirement the ability to make additional contributions after the age of 65 without satisfying a work test, makes good sense. I think allowing some delay on the application of the work test so that for the first year after you retire you can continue to make superannuation contributions also is a good idea," says Professor Piggott. "No one really could complain about these measures."
"Raising the means test threshold on income from exertion – I'd like to see it raised a lot more but at least it's been raised. I think it goes from something like 11,000 to 14,000. So that's worth something."
Lecturer Kathrin Bain from Taxation and Business Law at UNSW Business School summed up the personal income tax cuts. However, she warned that this isn't tax simplification.
"The Government likes to say that it's their personal tax plan and it's making tax rates lower and fairer and simpler, and this is assuming their seven-year plan goes ahead you will only have three tax brackets, four if you count the tax-free threshold. But that's really not simplification. I mean, the hard part usually for individuals is working out what their taxable income is."
Low and middle-income earners are set to be the main beneficiaries, at up to $665 dollars a year.
Professor Fiona Martin look at this in a bit more of the detail for the UNSW round table. "This is $10 a week; it's really not going to cut it one way or the other, I don't think, in their expenditure and their livelihood, their quality of life."
She added; "if you look at people on 200,000, it's a tax break of $135. So sure, they're saying that it's not aimed at high income earners at this stage, and it's not. But over the long period, it is."
"Is this the best thing for our economy? If we're coupling this with doing other things for low income earners, then I could see the rationale to give everybody a life in the economy, to help the long-term unemployed, to help youth unemployment – and by youth, I mean 18 to 24 year olds, which we now know are either unemployed or underemployed. There's nothing about helping those people, nothing at all in this budget."
Kathrin Bain has also found that cricketers get a tax break. "The International Cricket Council is getting a five-year tax exemption to help them fund the ICC World 2020 that's being held in Australia," she said.
"In terms of individual cricketers - or anyone else famous - there was actually another minor change that you'll no longer be able to licence your image to a company or a trust, which they were using to minimise their taxes."
A full audio podcast of the entire BusinessThink Federal Budget 2018 round table is also available.