11 May 2006

Is this Peter Costello's best ever budget?

Peter "Smirky" Costello handed down his eleventh budget as federal treasurer this week, and from what I've seen so far, it looks pretty good.

He's forecast a budget surplus of $10.8 billion for the 2006/2007 financial year.

Examining it in depth, the two great achievements of this budget are that all taxes on superannuation benefits for over-60s and RBLs have been abolished.

Which the cynical may like to point out (and there is definitely truth to this) that this is another example of the Howard Government pandering to baby boomers, this is good for the rest of us on several levels:

1. Only a brave future government would consider re-imposing these.
2. We all have to retire eventually.
3. Anything that simplifies tax legislation is pretty good in my book.

The budget hasn't just been about improving the tax situation of superannuation, though.

Income tax rates have been reduced.

As this is the one area that our conservative, sensationalist media can pick up on a possible way to blow holes in the budget, they've already honed in on the pay of people earning $50,000 per annum.

Apparently, they'll only take home an extra $9.81 per week.

Personally I don't have a problem with income tax rates being reduced - we have a bizarre situation in Australia where the corporate tax rate is 30%, while the top marginal tax rate will now be 45% (not including the Medicare levy).

This is designed to achieve more foreign investment, but has the unwanted disadvantage of discriminating against Australian taxpayers in favour of multinational companies.

No wonder people use offshore bank accounts and companies for tax avoidance purposes.

The other angle that our tired and unoriginal media go for when this happens is to compare apples with front-end loaders by looking at someone earning $30,000 a year with someone earning $1,000,000. This comes in the form of, "How much will each group save?"

Naturally, this gets a bite, especially on talkback radio. People can be such idiots.

Families earning up to $40,000 get the full amount of Family Tax Benefit Part A.

And so they should. No controversy here.

Costello has scrapped the cap on subsidised childcare places.

This one does concern me, and not just because I don't have kids.

This is stuffing around with supply and demand on a grand level. The obvious outcome of all this is that childcare itself will climb through the roof as parents scramble to take advantage of this.

And the net result is that the grant itself will end up being meaningless.

Not that anyone will notice this until well after the next election.

Kinda similar to how the First Home Owner's Grant contributed (along with low interest rates) to the most extreme property bubble this country has ever seen. We still haven't seen the complete fallout from this yet.

These were probably the most important new initiatives.

On the whole I like it. I think it's the best budget that he's introduced ever. It has its stupid bits, but who ever claimed that politicians were smart?


Anonymous said...

I can't say I know a hell of a lot about finance, so I don't have much to say about the budget.

This made me roll my eyes though:

...by looking at someone earning $30,000 a year with someone earning $1,000,000. This comes in the form of, "How much will each group save?"

Typical simplistic idiocy from the media. Look, look - that's unfair. Let's get righteously pissed off about this for the "Aussie Battler" (I really fucking hate that term).

Dikkii said...

G'day Adam, and as always, thanks for dropping by.

It's just too predictable - our meeja will always focus on the lowest common denominator and that seems to be, sadly, the "Aussie Battler" angle.

What makes this so fucking hypocritical is that our "fourth estate" is disproportionately conservative and reactionary.

They've been pushing for tax cuts for a long time, and right when they're provided, they turn around and bite.

And have the NERVE to hint that they're doing it for the Mums and Dads out there.

I've had a gutful.

By the way - happy mother's day to all Mums out there.