Budget 2019 sees Josh Frydenberg pledge billions for tax cuts, infrastructure, but no instant surplus

Updated

The Coalition will have to win re-election if it is to deliver its long-touted surplus, which the Budget tips to be $7.1 billion next financial year.

Key points: The Budget forecasts a $4.2 billion deficit this year, before a $7.1 billion surplus in 2019-20

Low- and middle-income earners are set to benefit from bringing forward personal tax cuts

Billions have been pledged for infrastructure, health care and small business

Treasurer Josh Frydenberg's first Budget includes billions of dollars for tax cuts, major road upgrades and health care.

One of the biggest savings measures is a plan to change how welfare recipients declare their incomes, which the Government expects to add $2 billion to its coffers.

But while the Treasurer has trumpeted that the Budget is "back in the black" — like Labor did when it was in power — the Coalition has only forecast a surplus and has yet to deliver one.

There had been speculation the Government would attempt to deliver a surplus for the current financial year, but that has failed to eventuate.

The 2018-19 financial year is projected to end with a $4.2 billion deficit.

The Budget forecasts surpluses in each year over the forward estimates, reaching as high as $17.8 billion in 2021-22.

The Treasurer said he was confident the Budget could buffer economic headwinds hitting other economies, but confirmed there were risks on the horizon.

"The residential housing market has cooled, credit growth has eased and we are yet to see the full impact of flood and drought on the economy," Mr Frydenberg said.

"Global trade tensions remain, the Chinese economy has slowed and there has been a loss of momentum in Japan, Europe and other advanced economies."

The $7.1 billion forecast surplus for next year is up from the $4.1 billion that the Government predicted in its mid-year budget update last December.

The Coalition heads into an election with $43 million in budgeted but unannounced spending measures for this financial year and more than double that for 2019-20.

Net debt is forecast to be $360 billion next financial year, but the Coalition is promising to eliminate it by 2030 if it retains government.

Personal and business tax cuts

The centrepiece of the Budget is $158 billion in income tax cuts over a decade.

The first part of the plan is immediate, which includes a doubling of the tax offset announced in last year's budget.

Income Tax cut from 2018-19 Tax cut from 2022-23 Tax cut from 2024-25 $30,000 $255 per year $255 per year $255 per year $60,000 $1,080 per year $1,080 per year $1,455 per year $90,000 $1,215 per year $1,215 per year $2,340 per year $120,000 $315 per year $2,565 per year $4,440 per year $150,000 $135 per year $2,565 per year $6,540 per year $180,000 $135 per year $2,565 per year $8,640 per year

The change means people earning up to $126,000 will get $1,080 back at tax time.

The Coalition will also seek to flatten tax brackets by 2024, cutting the 32.5 per cent tax bracket to 30 per cent.

"This will cover all taxpayers earning between $45,000 and $200,000 and will mean that 94 per cent of taxpayers will pay no more than 30 cents in the dollar," Mr Frydenberg said.

It would need to pass the Parliament for the changes to be implemented — something Finance Minister Mathias Cormann said would have to happen after the election.

The Budget forecasts a 5 per cent unemployment rate for the next four years, with wage growth tipped to grow from 2.5 per cent in 2018-19 to 3.5 per cent by 2021-22.

Money for infrastructure and health care

The Coalition has also promised to spend $100 billion on roads and rail over a decade.

Mr Frydenberg said the Government was able to promise that because of the improved state of the Budget, thanks in part to commodity prices and a boost in exports.

The Government has matched Labor's commitment to end a freeze on the Medicare rebate for GP visits from the first of July, as part of a $1.1 billion primary healthcare plan.

The Coalition is pledging to spend the most money a government has ever spent on a royal commission, offering more than half a billion dollars to investigate the mistreatment and institutional abuse experienced by people with a disability.

That funding sees the Government agreeing to a call the Greens have long championed.

The Budget papers also show there has been a $1.6 billion underspend on the National Disability Insurance Scheme over the forward estimates.

The Coalition's slip into minority government last year meant the Parliament was able to change laws for medical evacuations of refugees on Manus Island and Nauru.

That prompted the Coalition to reopen the Christmas Island detention centre, which it said would prevent refugees from coming to the mainland.

The Budget papers show the Government will spend $150 million this financial year and only $23 million in 2019-20 for regional processing on the island. There is no additional funding for future years.

Senator Cormann said that was because the Coalition planned to change laws allowing the medical evacuations if it won the election.

He said doing that would allow the Government to again close the Christmas Island detention centre.

Business incentives to fill skills shortages

The Budget includes $525 million for a skills package, which in part is designed to help create 80,000 new apprenticeships in sectors with skills shortages.

Businesses that hire apprentices in these industries will receive incentive payments worth $8,000 per placement.

The program includes a $2,000 incentive payment for apprentices.

The instant asset write-off scheme will be increased from $25,000 to $30,000, which businesses with an annual turnover of $50 million can use each time they purchase new assets.

That policy will cost the Budget $400 million over four years.

Targeting tax dodgers and welfare overpayments

The Coalition plans to automate the income reporting processes for people on welfare payments.

It expects that will generate $2.1 billion worth of savings over five years, at a cost of more than 200 jobs.

A further $1 billion will go to the Australian Tax Office to crack down on the black market and to target multinational tax avoidance.

The Coalition expects that investment will return $2 billion to the Government's bottom line.

Topics: budget, government-and-politics, federal-government, business-economics-and-finance, australia

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