Georgie Gardner: Good morning, this budget sounds almost too good to be true – what is the catch?
Ross Greenwood: Well the catch is if you believe Scott Morrison’s economic forecasts going forward. Whether you believe, over the next 10 years for example, while he is handing out $140 billion in tax cuts that will really be highly beneficial to families, whether Australia is in fact going to suffer an economic downturn in that time. Does China hold up? Do commodity prices hold up? Because the big problem with handing out tax cuts is always, once you got them baked in, its very hard to take them out.
So if the economy falls and the government income falls, then that can be a fundamental problem. So the real punt here is the economy holds up for the next decade as it has for the past 27 years.
Georgie: A lot of thought also on if there’s been enough consideration for future generations. The reality is we’re not in surplus yet, can we really afford to ‘splash the cash’?
Ross: Look, this is a really good questions and whether the government has gone too early in handing out the tax cuts. But look, lets look at the reality, there is an election coming – the government wants to put its best foot forward, it does have an extra $11billion to spend than this time last year, so as a result its set out a plan to hand out tax cuts.
As the Treasurer will no doubt say later on this morning, ‘its your money, its not the governments money’ and so they’ve put themselves with a speed limit on the amount they can tac the community.
If basically, there is more tax being handed back in tax cuts no doubt, but the real issue is still if there is going to be the jobs created that have been over the past 12 months.
Because there has been no doubt Australia has been in a sweet spot when it comes to income, more companies are paying taxes, commodities prices have improved, oil prices have picked up, and then on top of that, and do bear in mind the government receive about half of all the revenue it receives each year from PAYE tax payers.
Georgie: And of course Ross, there is that $35 billion surprise package, $35 billion for prize winfall – the government could pay down the debt if they didn’t pay out tax cuts? Are they trading lower debt for political gain?
Ross: They saw they will ultimately pay off debt, around $126 billion over the course of the next 10 years. This of course relies on the individual – how would you prefer this additional money to be spent? Do you want it spent on infrastructure? Do you want it spent on income tax cuts? Company tax cuts?
Because one thing to bear in mind about this from a political point of view is that the government right now can promise a tax cut, and Labor can promise that but Labor doesn’t want company tax cuts.
They’ve got more money, they want to change negative gearing laws and capital gains tax. So technically when you see the response to this budget from the Labor party before the next election, you will see even bigger personal income tax cuts and a promise to get out of that debt much, much sooner.
Georgie: You talked about external factors, what does happen if economic growth slows quicker than expected? Is the government’s budget fortune too reliant on the success of China?
Ross: I think it is, but I think there’s a few points that have happened. For example, after the global financial crisis, companies lost money and as a result, huge tax losses. So because they’ve lost all this money, they haven’t had to pay tax three to four years, four to five years – well, that’s now ending.
So big companies in Australia now have to pay back taxes.
One other small thing I’ve spotted of course is this thing about the cash economy.
Well, every Treasurer since the beginning of Treasurers has always promised to crack down on the black economy. So this case, now do remember if you pay your tradie, your builder, $10,000 or more in cash, not only are they breaking the law, but you’re breaking that law by giving it to them.
So there’s these crackdowns inside this budget, that are – if you like – secrets inside the budget on ways the government will raise revenue.
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