Tuesday, 13 May 2014

2014 Federal Budget

What can you say?

Every once in a while a Federal Budget is delivered that makes the country gasp at the sheer audacity of it. This is that Budget.

Joe Hockey is not a natural orator. Nor is he a natural treasurer. So this budget, and budget speech, was always going to be tough for him.

It's hard when you start by creating a false narrative of a Budget Crisis, that is easily discredited by economists, the Opposition, businesses, and pretty much everyone that understands the basics of economics.

It's harder when you break as many election commitments as this Government has, after spending the last 3 years hammering the previous Gillard/Rudd Government on breaking its election commitments.  The level of hypocrisy is astounding.

The speech didn't actually provide a lot of detail in terms of the specific spending cuts and the revenue increases, apart from the those already announced in the media. In looking at the the actual Budget papers, you see the "Devil in the detail".

Here are some (and only some) of the items that may affect a lot of our clients.


  • Abolition of the Dependent Spouse Tax Offset from 2015/16.
  • Abolition of Mature Age Worker Tax Offset from 2015/16
  • Introduction of 2% Temporary Budget Repair Levy on incomes higher than $180,000 from 1st July 2014.
  • Reintroduction of indexation of fuel excise (even higher petrol prices, everyone).
  • Changes to HECS/HELP repayment rates to accelerate repayments.
  • The company tax cut of 1.5% is still on (unless you are one of the country's biggest companies).

Family Tax Benefits

  • When your youngest child turns 6, or your income is more than $100,000, you will no longer be entitled to Family Tax Benefit Part B.
  • Reduction in end of year Part A supplements from $726 per child to $600 per child.
  • Family Tax Benefit Part A payments - no indexation for 2 years.

Superannuation and Pensions

  • There will be a 4 year deferral of the increase of the rate of compulsory superannuation paid. The current rate of 9.25% will remain in place until 30th June 2018, then increase each year by 1/2% until it reaches 12%. 
  • The increase in the pension age to 70 will not happen until 2035. Changes will be made from 2025. (However, given this is over 10 years away, any announcement made now about this is not worth anything.)


  • The introduction of a $7 Medicare co-contribution payment (because apparently the Medicare levy you pay now isn't a contribution)
  • Those with concession cards and children under 16 will have their contributions capped at 10 visits.

Spending Cuts
Amid the dazzling array of cuts in the Budget papers, a few stood out for me:

  • Spending on the Arts to reduce by $87.1 million  over the next 4 years
  • Cuts in funding to the ABC of $35.5 million over the next 4 years
  • Cuts in funding to the SBS of $8 million over the next 4 years
  • Cuts in funding to Science and Research Agencies of $119.2 million over the next 4 years
  • Abolition of Tools for Your Trade Incentive Programme (saving $914 million)
  • Cessation of the Ethanol Production Grants Programme (saving $366 million)
  • Cuts to funding of the Australian Taxation Office of $143 million over the next 4 years
Local Matters:
Still waiting on something from our new Federal Member, Cathy McGowan.
UPDATE: Follow her comments on Twitter.

My Reaction
A change in Government always results in a change of spending priorities. It happens every time.

What I think makes this Budget different is the way in which the message leading up to the Budget has been so scrambled, and delivered in such a piss-poor manner. We have a Budget Crisis that still allows a promotion of the ideologies of the current Government, leading to poor decision making of spending allocations, whilst at the same time not really addressing the fundamental long term problem of the Budget, which is revenue raising, not spending.

 The end result of this is that the budget burden has fallen more heavily on those least able to afford it, families, and those dependent on welfare of some sort.

The budget cuts to education and health over the next few years are just sickening. Gonski is just a distant memory, and our country's current and future children will be the worse for it.  And given that Education and Health are the primary responsibilities of the State Governments, expect a deterioration of State budgets (and State/Federal relations) over the coming years as the Federal funds reduce to a trickle.

The reduction in spending will lead to a real reduction in Government services, but it will also result in a slow down in the economy. With job cuts of 16,000 and tens of billions in spending reduced, this will hit businesses and will trickle down to further job cuts in the private sector.

We will have austerity measures which will have the impact of reducing consumer confidence. The recession we have to have (or that they want us to have?).

The only upside here is that I can see real problems with the Government getting a large part of their Budget measures through an increasingly hostile Senate. Labor and the Greens will be against most of these measures, and the initial comments from Clive Palmer seem to indicate that his senators will be against it as well.

We were all expecting it to be something like this. But that doesn't make the Budget any better.

Good luck everyone. We could all be in for a bumpy ride.