Treasurer Josh Frydenberg has laid out a plan to deliver $158 billion in tax cuts for everyday Australians and $525 million to plug the skills gap and create jobs, as part of a Budget that the Morrison Government says will result in a $7.1 billion surplus in 2019-20.
Under the plan, the 32.5 per cent tax rate will be cut to 30 per cent, meaning 94 per cent of the tax-paying public – those who earn between $40,000 and $200,000 – will pay less tax.
For the 4.5 million Australians earning between $50,000 and $152,000 per year, the savings will amount to $1080. More than 10 million Australians will see some form of tax relief as early as July.
Frydenberg described this as the biggest change to the country’s tax system since the Howard Government, and said it will help to counter the rise in cost of living and boost spending in the economy.
Russell Zimmerman, executive director of the Australian Retailers Association, agrees.
“Given taxpayers will have this cash as soon as July if their tax returns are complete, this represents a substantial and almost immediate boost to retail spending across the economy,” Zimmerman said.
Optimistic wage growth forecast raises questions
Frydenberg said the Government was lowering taxes because “we want Australians to earn more, and we want Australians to keep more of what they earn”.
He predicts workers will see their wages grow at a faster rate in the coming years. According to the Morrison Government’s forecast, wage growth will rise from 2.5 per cent in 2018-19, to 2.75 per cent in 2019-20, to 3.5 per cent by 2021-22.
But many have pointed out that the unemployment rate is not expected to change from 5 per cent over the next four years, which makes wage growth seem unlikely.
The Australian Council of Trade Unions called the Government’s wage forecasts a “fantasy”.
“Morrison and his government have produced 21 inaccurate wage growth projections in previous budgets and economic statements. Not once have they delivered the promised pay rises,” ACTU president Michele O’Neil said in a statement.
“They have deliberately kept pay low, cutting penalty rates, capping public service wages and encouraging employers in a race to the bottom.
“When working people get fair pay rises our living standards grow year after year, but tax cuts come at the expense of quality services.”
Small business in spotlight
Small businesses stand to benefit from several provisions in the Budget, including an expanded instant asset write-off threshold of $30,000, up from $25,000.
Businesses will be able to claim the write-off across multiple assets, such as machinery, and more businesses will be eligible for the benefit, with the cap on annual turnover moving from $10 million to $50 million. This translates to a further 22,000 businesses becoming eligible, according to Frydenberg.
“In a rapidly evolving environment compounded by challenges from online overseas retailers, high energy prices and uncertain economic conditions, this will help Australian retailers modernise and update to ensure they are well equipped to compete and grow,” Zimmerman said.
The Treasurer also announced an additional $60 million for a long-running federal grant program designed to assist in the international expansion of small and medium businesses with a turnover of less than $50 million a year.
The Export Market Development Grant, which reimburses up to 50 per cent of costs associated with entering an overseas market such as airfare to the country and digital advertising through Google and Facebook, can be claimed against costs up to $300,000, and can be used up to eight times over the lifetime of a business.
The Government also announced a new program to improve internet and mobile access in regional areas. The Regional Connectivity Program will upgrade wireless infrastructure in remote Australia, and could allow wider penetration of Australian e-commerce businesses into the farthest reaches of the country.
Along the same lines, the Government confirmed that the National Broadband Network is currently in three in four homes and businesses, with the rollout is set to be complete by 2020.
By Heather McIlvaine and Dean Blake