Treasurer Josh Frydenberg has laid out a plan to deliver $158 billion in tax cuts for everyday Australians, $525 million to plug the skills gap and create jobs and $100 billion to improve transport infrastructure. It’s all part of a Budget that the Morrison Government says will result in a $7.1 billion surplus in 2019-20.

Under the plan, the 32.5 per cent tax rate will be cut to 30 per cent, meaning 94 per cent of the tax-paying public – those who earn between $40,000 and $200,000 – will pay less tax.

For the 4.5 million Australians earning between $50,000 and $152,000 per year, the savings will amount to $1080. More than 10 million Australians will see some form of tax relief as early as July.

Frydenberg described this as the biggest change to the country’s tax system since the Howard Government, and said it will help to counter the rise in cost of living and boost spending in the economy.

Russell Zimmerman, executive director of the Australian Retailers Association, agrees.

“Given taxpayers will have this cash as soon as July if their tax returns are complete, this represents a substantial and almost immediate boost to retail spending across the economy,” Zimmerman said.

Optimistic wage growth forecast raises questions

Frydenberg said the Government was lowering taxes because “we want Australians to earn more, and we want Australians to keep more of what they earn”.

He predicts workers will see their wages grow at a faster rate in the coming years. According to the Morrison Government’s forecast, wage growth will rise from 2.5 per cent in 2018-19, to 2.75 per cent in 2019-20, to 3.5 per cent by 2021-22.

But many have pointed out that the unemployment rate is not expected to change from 5 per cent over the next four years, which makes wage growth seem unlikely.

The Australian Council of Trade Unions called the Government’s wage forecasts a “fantasy”.

“Morrison and his government have produced 21 inaccurate wage growth projections in previous budgets and economic statements. Not once have they delivered the promised pay rises,” ACTU president Michele O’Neil said in a statement.

“They have deliberately kept pay low, cutting penalty rates, capping public service wages and encouraging employers in a race to the bottom.

“When working people get fair pay rises our living standards grow year after year, but tax cuts come at the expense of quality services.”

Small business in spotlight

Small businesses stand to benefit from several provisions in the Budget, including an expanded instant asset write-off threshold of $30,000, up from $25,000.

Businesses will be able to claim the write-off across multiple assets, such as machinery, and more businesses will be eligible for the benefit, with the cap on annual turnover moving from $10 million to $50 million. This translates to a further 22,000 businesses becoming eligible, according to Frydenberg.

“In a rapidly evolving environment compounded by challenges from online overseas retailers, high energy prices and uncertain economic conditions, this will help Australian retailers modernise and update to ensure they are well equipped to compete and grow,” Zimmerman said.

The Treasurer also announced an additional $60 million for a long-running federal grant program designed to assist in the international expansion of small and medium businesses with a turnover of less than $50 million a year.

The Export Market Development Grant, which reimburses up to 50 per cent of costs associated with entering an overseas market such as airfare to the country and digital advertising through Google and Facebook, can be claimed against costs up to $300,000, and can be used up to eight times over the lifetime of a business.

The Government also announced a new program to improve internet and mobile access in regional areas. The Regional Connectivity Program will upgrade wireless infrastructure in remote Australia, and could allow wider penetration of Australian e-commerce businesses into the farthest reaches of the country.

Along the same lines, the Government confirmed that the National Broadband Network is currently in three in four homes and businesses, with the rollout is set to be complete by 2020.

Support for power bills, infrastructure

Other provisions in the 2019-20 Budget that may benefit retailers include $79.2 million in funding to encourage the purchase of energy efficient appliances and educate consumers and businesses on power consumption.

Nearly four million eligible social security payment recipients will also get a one-off, tax-exempt payment to assist with cost of living expenses, including their next power bill. The payment will give $75 to singles, or $125 to couples, and amounts to a $284 million investment into the economy.

The Government also plans to spend a record $100 million on infrastructure, with highways, roads, and airports all to be improved over the coming decade. Freight routes will see an additional $1 billion added to the already $3.5 billion investment, enabling businesses to more easily access and stock communities around the country.

A four-fold increase to urban congestion funding aims to tackle the issue of wide scale congestion through Australia’s largest cities, which limits access to employment and services, while also obstructing access to domestic and international markets. Major corridors and arterial roads will be key priorities, with smaller pinch points to also be addressed.

Climate change ignored

Despite the large sums thrown into other sections of the economy, several parties have taken issue with the scant support for action on climate change.

While $3.5 billion is being set aside for disaster relief, the Government committed just $189 million over four years to its climate fund, which Greens leader Richard Di Natale called a “cynical mess”.

“It is shameful that this government has only committed a pittance on their national electric vehicle strategy and to modernise our hopelessly outdated electricity network,” Di Natale said.

“One thing that this budget makes absolutely clear is that we don’t lack the financial resources to solve the problems we face as a nation. What we lack is the political vision.”

By Heather McIlvaine and Dean Blake 

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