2007-08 Federal Budget Overview

Federal Treasurer, Peter Costello, brought down his 12th Budget saying the Australian economy has come a long way and made a lot of progress. He said the Budget has been framed to lock in that progress:- to keep people in jobs; to keep our living standards up. Mr Costello said de didn't want to lose all that had been achieved over the last 10 years and wanted to lock in the gains and move forward.

Treasurer Costello said the next decade will bring challenges all of its own — the ageing of the population, health care, aged care, the emergence of climate change, the instability of our region and the global shocks which can threaten our economy.

He said if the achievements of the past are locked in it will help with the challenges of the future. He said the Government wanted to meet and deal with future challenges from a position of strength. He said it is a Budget which will build the economic capacity and give strength.

Key elements of the Budget include:

Fiscal Outlook

The 2007-08 Budget provides for an underlying cash surplus of $10.6 billion, the Government's tenth surplus.

Economic Outlook

The Budget forecasts economic growth to be 3.75 per cent in 2007-08 reflecting an assumed return to average seasonal conditions in the farm sector and a partial recovery from the drought. Inflation is forecast to be 2.5 per cent in 2007-08

Employment growth is expected to ease to 1.5 per cent in 2007-08, consistent with around-trend non-farm GDP growth and a modest rise in real labour costs. The participation rate is expected to rise to 65 per cent, while the unemployment rate is expected to increase modestly to 5 per cent in 2007-08.

Tax cuts

All taxpayers will receive tax cuts over the four years valued at $31.5 billion

From 1 July 2007, the low income tax offset will increase to $750 per year and the 30 per cent threshold will rise from $25,000 to $30,000.

From 1 July 2008, the 40 per cent threshold will increase to $80,000 and the 45 per cent threshold will increase to $180,000.

Education Initiatives

$5 billion will be invested in a new Higher Education Endowment Fund to provide a perpetual source of funding for university capital works and research facilities. The Government will make further contributions from future surpluses.

$768 million for universities to simplify and boost funding and to increase funding and enrolment flexibility.

$222 million for increased income support for tertiary students and an extra 3,500 Commonwealth scholarships.

More assistance to apprentices and the VET sector.

$549 million for 1st & 2nd year apprentices in skill shortage trades for a $500 education voucher to offset fees and, if under 30, a $1,000 tax-free wage top-up.

$843 million extra to improve the quality of teachers and the education of all Australian school children. $700 tutorial vouchers to help students meet literacy and numeracy standards.

Land Transport Infrastructure

Funding of $22.3 billion will be provided over the five years from 2009-10 for Australia's road and rail infrastructure, including $16.8 billion for the national network. The Government will also invest $10 billion over 10 years to conserve and sustain Australia's water supply.

Superannuation

The Government will boost superannuation savings by putting an extra $1.1 billion into the superannuation accounts of lower income earners through a doubling of the co contribution paid for eligible contributions made in 2005-06.

Health

In 2007-08 the Government will spend $51.8 billion on health and aged care, including $772 million for improved detection and treatment of chronic and complex conditions; $486 million for medical research infrastructure in 2006-07 and $1.6 billion for aged care initiatives.

Environment

$741 million for practical climate change initiatives, including the doubling to $8,000 of rebates for the installation of solar panels by households.

$10 billion over 10 years to conserve and sustain Australia's water supply.

$2 billion to extend the Natural Heritage Trust.

Regional and Rural Australia

An additional $314 million in Exceptional Circumstances assistance bringing to $1.6 billion assistance since 2002-03.

$342 million for improved rural services.

$205 million to help primary producers through extending the Agriculture - Advancing Australia initiative.

National Security and Defence

$6.1 billion over 10 years to enhance recruitment and retention of military personnel and logistics.

$702 million for national security initiatives to further safeguard against terrorism, including better e-security.

 

Personal Tax Cuts in Detail

The Government will provide personal tax cuts worth $31.5 billion over four years

From 1 July this year, the 30 per cent tax rate will only apply to income over $30,000:- up from the current threshold of $25,000.

The low income tax offset will also rise from $600 to $750 and will begin to phase-out from $30,000. This means that low income earners eligible for the offset will not pay tax until their annual income exceeds $11,000.

From 1 July next year, we will increase the 40 per cent threshold from $75,000 to $80,000 and the 45 per cent threshold from $150,000 to $180,000.

Improvements in disposable income from tax cuts in 2007-08 and 2008 09

 

Federal Opposition's Response

Oppositin Leader Kevin Rudd's Budget Address in Reply

Labor Leader, Kevin Rudd delivered his Budget Address in Reply on Thrusday 10 May 2007.

In his address he noted three core challenges facing Australia to secure its future. First, to build long-term economic prosperity, beyond the mining boom, by rebuilding productivity growth. Second, to deal with, rather than avoid, the great challenge of climate change and water before the cost of inaction becomes far too great. Third, to make sure the fair go in Australia has a future, not just a past – both within the workplace and outside the workplace as well.

He spoke of economic fundamentals; the productivity challenge; his "Education Revolution"; announced his Trades Training Centres in Schools policy; reiterated his national broadband policy; business regulation reforms; climate change and water as well as workplace reform.

His full address is available here.

Shadow Treasurer's Budget Night Response

Labor's Shadow Treasurer, Wayne Swan welcomed the tax cuts and one-off payments in the 2007 Federal Budget because many Australian families and carers are under financial pressure.

He said it is a clever election-year budget - but it is a budget that fails the future test.

Mr Swan claims the Budget does very little to build Australia’s future productivity. Instead it relies on the continuation of the mining boom for our future economic prosperity.

In his initial statement Wayne Swan said the current mining boom has injected $55 billion into our economy over the last year and over the last five years has injected more than $300 billion into the Budget. He said this massive injection of cash is masking the fact that Australia’s productivity growth is so low.

According to the Shadow Treasurer, some measures in this Budget reflect the national policy agenda Labor has been setting.

He said the 2007 Federal Budget fails to address long term challenges for Australia’s future, including:

* The urgent need to revive Australia’s flagging productivity;
* Investment in an Education Revolution;
* Delivering an national high speed broadband network; and
* Decisive action to deal with the economic cost of climate change and the national water crisis.

PRODUCTIVITY

He also said the Budget failed the future test firstly because Australia needs an Education Revolution to boost productivity growth - the key to our future economic prosperity.

This Education Revolution must not only address the Government’s failure to invest in universities. It must also deal with Government’s continuing failure to invest in early childhood education, school education, and vocational education and training.

Even after this Budget, national investment in education will have declined from 2 per cent of GDP in 1995-6 to 1.6 percent of GDP in 2007/2008, according to Wayne Swan.

And far from lifting productivity, the 2007 Federal Budget papers indicate that Australia’s productivity growth will decline from the end of the next financial year.

Labor said the Budget fails the future test secondly because it does practically nothing to build a fast speed national broadband network.

A fast speed national broadband network is essential to increasing productivity growth – particularly for small business and for regional and rural Australia.

CLIMATE CHANGE AND WATER

Labor also claimed the a third core reason this Budget fails the future test is that it does not fund any new large scale practical measures to effectively deal with the economic cost of climate change and the national water crisis.

In addition to the Government’s failure to act on a national emissions trading scheme, the 2007 Federal Budget does nothing to boost the mandatory renewable energy target or to introduce a comprehensive national strategy to reduce electricity demand.

Wayne Swan said despite dam levels being at record lows across Australia, the 2007 Federal Budget fails to establish any significant new initiatives on urban water security in partnership with state, territory and local governments.

CONCLUSION

The Shadow Treasurer said the 2007 Federal Budget is yet another squandered opportunity to use the once in a generation $300 billion mining boom to secure Australia’s long term economic prosperity.

Australian families care about their children’s future. That is why they legitimately want their federal budgets to address the long term challenges that Australia faces.

ADDITIONAL LABOR STATEMENTS

Education Spending Welcome – But no Education Revolution
Tax Cuts and Childcare Benefits Welcome – but give back less than you think
Budget Fails the Climate Change Test
Mining Boom Jackpot Allows Record Pre-Election Spending
Australia Relying On Good Luck, Not Good Policy

Selected Budget Commentary, Articles
and Interviews

ABC Federal Budget Coverage - including in-depth coverage including audio and video on demand

The Australian (Editorial) says Peter Costello has crafted a budget that is rich in politics and pregnant with the promise that dividends from the boom will be used to transform Australia from a year-to-year existence to a real wealth economy underpinned by perpetual investment returns.

The Age (Editorial) argues that a $10 billion surplus has allowed the Treasurer to play Mr Responsible and Santa Claus in an election year. its says the great fear for this election-year budget was that the Federal Government would sacrifice the future for the present. But on any reading of the figures, it has balanced, well-measured investment in the country with an ample splash of electoral gifts.

The Daily Telegraph (Editorial) says with a general election looming, Federal Treasurer Peter Costello was at pains last night to accentuate the positive as he handed down his 12th consecutive budget. Why would he not be? For the news on the fiscal front is overwhelmingly good. The economy is growing, jobs are being created and government receipts are - to say the very least - healthy.

The Sydney Morning Herald (Editorial) argues that for a pre-election budget from a government behind in the polls, Peter Costello's 12th was surprisingly responsible. After 15 years of uninterrupted growth, helped by competent and responsible management of the economy, there is plenty of money the Government could give away. And certainly there are handouts and tax cuts - some of them almost embarrassing election bribes to sections of the voting public who might be wavering in their loyalty to John Howard - but there is no sign the Government has been spooked by electoral unpopularity into being over-generous.

The Herald Sun (Editorial) says if the pundits are right, the three hot button issues of the coming election campaign will be economic management, national security and the environment. This Budget enhances the Government's standing on two of these, but comes up short on the other.

The Courier-Mail (Editorial) says the Budget is a measured and responsible document calculated on what is best economically and politically. The economic test is that, while the revenue stream shows no signs of slowing, there is a limit to the largesse that can be spread around.

A Budget to Win An Election (The Age) - Leon Gettler argues this is the Budget that aims to reverse the Howard Government's poll deficit, lure back the disillusioned battlers, neutralise the potential backlash from WorkChoices and boost its lowly green credentials.

Clever Mix of Politics and Economics (SMH) - Ross Gittens argues Peter Costello's 12th budget is a clever mix of smart politics and surprisingly impressive economics.

Tax Cuts to Lure Back the Battlers (SMH) Peter Hartcher says Kevin Rudd may have won over many of the middle-income "Howard battlers" in recent months, but tonight Peter Costello produced a big bundle of tax cuts to win them back.

Bringing home the bacon for the PM's battlers (The Australian) Mike Steketee says THIS is the budget the Government hopes will bring home the battlers. Peter Costello does not spend all his time thinking about the economic future, though that was the emphasis of his budget speech last night. He also is a long-term political thinker, as you have to be with John Howard Araldited to his prime ministerial chair.

Industry and Community Responses

Australian Chamber of Commerce and Industry

The Australian Chamber of Commerce and Industry says the Budget addresses the skills crisis with a boost in spending on education and training. "This is the education budget that the business community was looking for," ACCI chief Peter Hendy said.

Australian Council of Trade Unions (ACTU)

ACTU president Sharan Burrow condemned the Budget's tax cuts, saying they will do nothing to ease pressure on working families. She said the Budget had failed to provide any substantial steps to address the skills shortage, and the Government was continuing to squander the benefits of the one-off mining boom.

Australian Industry Group

The Australian Industry Group (Ai Group) said the Budget was good for business and should not be inflationary. Ai Group chief executive Heather Ridout also welcomed the tax cuts for low-income earners and the Government's investment in infrastructure.

National Farmers Federation (NFF)

National Farmers Federation President David Crombie said the 2007Federal Budget reflects the key imperatives we have pushed in calling for a 'generational shift in thinking' to deliver long-term 'nation-building' programs that recognise and build upon modern farming's sustainability and competitiveness.

Australian Council of Social Service (ACOSS)

Australian Medical Association (AMA)

AMA Vice President Dr Choong-Siew Yong said that the Government had identified key areas for health funding, but the funding in most cases was inadequate for long-term impact. He said the Budget lacked funding in key areas including indigenous health, rural health, combating obesity, chronic care and aged care.

Greenpeace

Greenpeace said the Federal Treasurer Peter Costello had switched from being a climate change denier to a climate change pretender. Greenpeace chief Steve Shallhorn said the organisation was glad Mr Costello had used the term climate change in his Budget speech, but he had not introduced any real measures to battle the threat.

Business Council of Australia

The Federal Budget fails to offer a strategic tax reform plan or ease Australia's growing business tax burden according to the Business Council of Australia. Business Council of Australia president Michael Chaney said spending initiatives in important areas such as education and infrastructure were welcome and in line with reforms needed to promote Australia's living standards.

Taxpayers Australia

Australia's peak taxpayer advocate body applauded the across-the-board tax cuts handed down in tonight's federal Budget. Taxpayers Australia chief executive Tony Greco said almost all taxpayers would benefit from Mr Costello's 12th budget.

Minerals Council of Australia

Minerals Council of Australia said the Federal Budget goes a long way to addressing the twin imperatives of Australia’s current economic circumstances – the need to invest the proceeds of today’s minerals boom to the future benefit of all Australians and the need to add capacity to enable the industry to better capitalise on the strongest global minerals market growth in a generation.

Australian Conservation Foundation

Australian Conservation Foundation executive director Don Henry says the budget ensures Australia continues to go backwards on tackling greenhouse gas pollution. HE said there are some useful but very modest increases in expenditure here for climate change, but it's nowhere near enough to ensure that our children's future doesn't include a dangerous climate

Official 2007-08 Budget Documents

Budget Speech	Budget Paper 1
Budget at a Glance	Budget Paper 2
Budget Overview	Budget Paper 3
Budget FAQ	Budget Paper 4
Portfolio Budget Statements	Appropriate Bills
Ministerial Statements	Final Budget Outcome
Mid-Year Economic and Fiscal Outlook	Portfolio Additional Estimates

 

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