Budget in poll position
It’s been decades since a Budget has been released this close to a federal election, writes
GENEROUS financial sweeteners are expected in the Federal Budget, which hasn’t been released this close to an election in at least 50 years.
However, the uncertainty swirling around next month’s election outcome means that savers, workers and investors should not bank on tomorrow’s Budget announcements becoming law.
As May 11 firms as the date Australians are likely to go to the polls, a MoneysaverHQ analysis has found that a Budget has not been unveiled so soon before an election since at least 1969.
This means the chance of a bad news Budget tomorrow is almost zero because the Coalition wants to win votes. But for any tax cuts, handouts and other sweeteners to go ahead, it also must win the election.
BetaShares chief economist David Bassanese said government finances were in a healthy position thanks to stronger iron ore prices.
“They will be able to project a surplus next financial year (and beyond),” he said.
“Chances are they may spend some of that surplus on tax cuts.
“It makes economic and political sense for decent tax cuts to be delivered in this Budget. Consumer spending is fairly vulnerable.
“There’s no point helping the economy with a tax cut that doesn’t kick in for two years.”
Other potential Budget bonuses include cash giveaways to households and a boost in infrastructure spending, particularly in regional areas.
Mr Bassanese said the DAVID AND LIBBY KOCH: Put your super on the right path ● Tax cuts for lower-income workers
● The planned 2022 tax cuts brought forward
● Big increases in regional infrastructure projects
● Extra bonuses for retirees and pensioners
● Cash handouts for households
● More small business tax breaks
election result would come down to voters choosing between tax cuts from the Coalition or Labor’s focus on boosting spending on health and education.
“That’s where the fault lines of the election campaign will be: more spending versus more tax cuts,” he said.
Deloitte Access Economics partner Nicki Hutley said the government would be “as generous as it can ahead of the election, while still ensuring a Budget surplus”.
Australia has not had a Budget surplus since 2007-08.
“Current tax cuts give very little to those on the lowest incomes,” Ms Hutley said. “It’s less likely that there will be significant changes for savers and investors who already have a range of offsets that advantage them at a significant cost to the Budget bottom line.”
Ms Hutley said people should “take nothing as given” once the Budget was announced.
And while voters would welcome tax cuts, Treasurer Josh Frydenberg must avoid being seen as frivolously dishing out short-term enticements.
“Never underestimate the power of self-interest and the hip pocket nerve,” Ms Hutley said. “The electorate can cheerfully lap up sweeteners while seeing through them.”