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Tax cuts and cheaper beer in pre-election Australian budget

Australia’s conservative government pledged tax cuts for low and middle earners, cheaper beer, and billions of dollars for new roads and rail lines in a pre-election budget Tuesday.

The measures are widely seen as the unofficial start of campaigning ahead of national polls due by May next year, with the government working to demonstrate fiscal responsibility while offering some sweeteners.

“The 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,” said Treasurer Scott Morrison.

He added that this would be done “while ensuring the government lives within its means”.

Morrison projected a budget deficit of Aus$14.5 billion (US$10.8 billion) in 2018-19, but said it would return to a slim surplus of Aus$2.2 billion a year earlier than forecast in 2019-20.

Rating agencies have previously warned Australia’s coveted AAA rating could be lowered if the government did not improve its budget balances and deliver on its surplus plans.

Personal tax cuts for those earning less than Aus$87,000 a year were a cornerstone of the budget, sold as helping Australians deal with the rising cost of living.

It amounts to barely Aus$10 a week, but that was all the centre-right government, which is lagging the opposition Labor in opinion polls, said it could responsibly afford.

Voter support for Prime Minister Malcolm Turnbull, who only has a wafer-thin parliamentary majority, has eroded in recent months amid perceived dysfunction in Canberra, with the Liberal leader having to bat away calls to step down.

The budget is seen as a way of reaffirming his credentials ahead of the election.

– Brain freeze –

Shadow treasurer Chris Bowen accused the government of abandoning any attempt to pay down spiralling national debt, which he said would remain above half a trillion dollars for another decade.

“This is a government that has given up on what we were told was the debt and deficit disaster,” he said.

Pumping money into infrastructure projects to create jobs was a key thrust, with the government earmarking Aus$5.1 billion to bankroll a rail link to Melbourne airport in a state governed by Labor.

It also put Aus$1.0 billion towards easing congestion on the busy freeway linking Brisbane and the Gold Coast tourist region, in another Labor state, as part of a 10-year national transport plan.

The government had already announced some big ticket items, including half a billion dollars to protect the Great Barrier Reef and plans to do away with a bizarre beer tax that hits craft breweries 40 percent more simply because they use smaller kegs.

“This not only champions the craft brewers that we’ve all grown to love, it raises a very tantalising prospect for Australians: the likelihood of cheaper craft beer,” said Morrison.

The government also handed Aus$140 million to the local film industry and there was more money for old-age care to encourage people to stay in their own homes longer.

The cash splash was made possible by a boost to revenue from a pick-up in commodity prices, more company tax, and employment growth putting less strain on welfare benefits.

The government will recoup some of its spending by clamping down on illegal tobacco sales, which have boomed since excise was increased on cigarettes, with the initiative expected to pull in Aus$3.6 billion over four years.

PwC Australia chief economist Jeremy Thorpe called it a “slurpee budget”, referring to the frozen beverage.

“We’re going to get a sugar high as the windfall spending flows through the economy, but hopefully we avoid the brain freeze,” he said.

Source: AFP

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