Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
The Hon. Scott Morrison MP
Federal Member for Cook
The Turnbull Government will build a stronger economy to create more jobs, provide tax relief to encourage and reward working Australians, guarantee essential services and keep Australians safe, while ensuring the government continues to live within its means by returning the Budget to balance.
The 2018 Budget sticks with our plan to strengthen the economy to ensure the benefits of stronger economic growth can continue to be secured and shared.
In 2017-18, the budget deficit will be $18.2 billion, less than half what it was just two years ago. This will be the best budget outcome for a decade.
A modest balance of $2.2 billion in 2019-20 is forecast, increasing to projected surpluses of $11 billion in 2020-21 and $16.6 billion in 2021-22. We have stayed on track for a surplus in 2020-21 for six successive budget updates. As always, the forecast outcome for 2019-20 is subject to Treasury’s assessment of economic conditions at the time of the Budget.
The budget is projected to remain in surplus for the whole period of the medium-term, with surpluses growing to more than 1 per cent of GDP from 2026-27, without breaching our tax cap, consistent with our fiscal strategy.
Average real expenditure growth has been reduced further down to 1.6 per cent, the most restrained of any Government in the last fifty years, seeing Government spending fall to 24.7 per cent of GDP, below the 30 year average at 24.8 per cent over the forward estimates. We are also keeping taxes under our policy speed limit of 23.9 per cent of GDP.
Net debt will now peak at 18.6 per cent of GDP in 2017-18 and will fall to 3.8 per cent of GDP by 2028-29. Gross debt will peak during 2019-20 at less than 30 per cent of GDP.
Tax relief to encourage and reward working Australians
Our seven-year personal income tax plan will make personal income tax lower, fairer and simpler. More working Australians will be paying lower rates of tax.
The plan has three parts: Step one – provide tax relief for low and middle income earners worth up to $530 to help with cost of living pressures. Step two – help protect what Australians earn from the impact of bracket creep. Step three – simplify and flatten the system by removing the 37 per cent bracket completely.
This will mean that by 2024-25, around 94 per cent of Australian taxpayers are projected to face a marginal tax rate of no more than 32.5 per cent. That compares with 63 per cent if we leave the system unchanged.
We are also acting to protect superannuation balances, extend the Pension Loans Scheme to all older Australians and expand the Pension Work Bonus.
We will also ease financial pressures on families in regional areas by relaxing the Parental Income Test for access to Youth Allowance for independent students who are considered independent through work from 1 January 2019.
Stronger growth for more jobs
We are backing business to support more Australian jobs. Our Enterprise Tax Plan is needed for our businesses to remain internationally competitive, invest, create more jobs, and boost wages.
Small businesses will benefit from a 12 month extension to the $20,000 instant asset write-off; tough new anti-phoenixing measures and we will also provide an extra $250 million for the Skilling Australians Fund so business can get the people and skills they need.
We will implement a 21st Century Medical Industry Growth Plan to create more jobs in this fast growing sector of our economy, including backing Australian medical scientists to become world leaders in genomic research through a $500 million investment. We are also committing $2.4 billion to our public technology infrastructure such as supercomputers, world class satellite imagery, more accurate GPS and a national space agency.
Farmers will benefit from better GPS and weather services and there will be more funding to protect against pests, disease and weeds as well as bolstered biosecurity measures.
Our $75 billion ten year rolling infrastructure plan will further strengthen our economy, help bust congestion in our cities, make rural roads safer, get our products to market and includes funding for the Melbourne Airport Rail Link, Western Sydney Airport rail, Brisbane Metro, Perth METRONET and M1 upgrade.
A $1 billion Urban Congestion fund and a $3.5 billion Roads of Strategic Importance initiative will also be established.
Guaranteeing essential services
The Government’s More Choices for a Longer Life Package will support Australians to live healthier, more independent and safer lives, so they can take advantage of the opportunities that a longer life brings.
This includes new 45 and 65 year old checks, measures to boost living standards, expand retirement income options and skills and training support.
The Package will also support choice on where Australians receive care by funding an additional 14,000 high level home care packages and the Government will also strengthen the regulation of aged care services to respect and protect older Australians.
Our legislated needs based funding for schools delivers $24.5 billion more over the next 10 years, 50 per cent more funding per student, on average, over a decade.
The Turnbull Government’s New Child Care Package will come into effect from 2 July 2018 providing more support for families who need it most.
Our new five year public hospitals agreement, which is being signed onto by the States and Territories, will deliver $30 billion in additional funding, almost a one third increase over the previous five years. And following last year’s Budget, funding for the Medicare Benefits Schedule and the Pharmaceutical Benefits Scheme has been guaranteed in legislation.
In rural and regional areas we have funded a plan to get more doctors to where they are needed through a new workforce incentive programme.
And every dollar committed to delivering the NDIS remains in place and always will.
Keeping Australians safe
We are taking further action, directly investing $294 million to harden up security at our airports. $50.1 million to upgrade security infrastructure at 64 regional airports. $122 million to enhance screening capability for inbound air cargo and international mail, $122 million to increase police and border force presence and capability at nine major domestic and international airports.
There is also additional investment to improve scrutiny of visa processing and biometric screening and clearance of visitors and goods at our borders.
And we are investing more than $160 million to help our police, criminal intelligence and domestic security agencies fight crime and prevent terrorism, including $68.6 million to disrupt, prevent and investigate child exploitation and abuse.
Ensuring government lives within its means
The Government has continued to control expenditure growth, reducing it further over the 2018-19 forward estimates to 1.6 per cent on average per year above inflation, down from 1.9 per cent over the 2017-18 forward estimates period. This compares to expenditure growth of 4.3 per cent between 2008-09 and 2013-14 and projected expenditure growth of 3.7 per cent over the 2013-14 Budget medium term.
The overall impact of new spending in this Budget is an improvement to the bottom line of $404 million over the forward estimates, demonstrating the Government has again more than paid for decisions to increase spending on higher priority items with spending reductions in other parts of the Budget.
Having inherited a trajectory of Government expenditure as a share of GDP headed for 26.5 per cent by 2023-24 and rising, according to the findings of the National Commission of Audit, our prudent budget management is projected to reduce that to 24.7 per cent over the current forward estimates period – below the 30-year average of 24.8 per cent.
As of this Budget, the Government will not need to borrow to meet recurrent expenditure from 2017-18, a year earlier than forecast in last year’s Budget.
The Government’s crackdown on multinationals continues through changes to the tax treatment of stapled structures and further tightening thin cap rules.
We are implementing the recommendations of our Black Economy Taskforce, targeting sectors where there is higher risk of under reporting of income, which is forecast to return $5.3 billion to the Budget.
The Government will reform the Research and Development Tax Incentive (R&DTI) to improve the integrity, transparency and fiscal affordability of the program.
The Turnbull Government’s plan for a stronger economy will put more money back in the pockets of Australians, create more jobs, continue to guarantee essential services and keep Australians safe, all while ensuring the Government lives within its means.
For Minister Cormann: Karen Wu - 0428 350 139
For the Treasurer: Andrew Carswell - 0418 505 376, Kate Williams - 0429 584 675, Sonia Gentile - 0455 050 007