# Budget 2015



## pixel (11 May 2015)

Tomorrow is the Big Day - again.
Has Hockey learned from last year's PR disaster?
Given the overall less favourable state of the economy, can he offer a better balance of wants and needs? Can he find a fairer social balance? And how will the Senate view and vote?

Anybody care to offer an educated guess before the mystery is unveiled?

Or wait and criticise the proposal afterwards?


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## qldfrog (12 May 2015)

what should be done:
deflate the RE bubble via legislation to avoid a pop,take over planning from councils/state, share the pain at all level:
ie no pension welfare rise and higher tax take, remove super from being a tax shelter into a saving tool and stick to a system once for all.
Tax foreign company aka BHP/RIO to a decent rate, ideally by costing the meterage of soil disturbed so that this country stops being raped and its resources wasted.
Stop migration now: there are no jobs whatsoever and bringing in 0.5 millions migrants a year only to support the RE bubble can only end in tears

I also have the feeling most of Australia have no idea of the mess we are in economically and just have a let's take from the rich and all is solved

What will be done?
nothing and worse probably a bit of extra populist 'for the battler and the poor pensionner" giveaway
And Labour will cry poor on any saving irrespective of its merits: who cares? not them.
expect to be disappointed


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## Knobby22 (12 May 2015)

Good start with the comments from Hockey to help the tax people close loopholes used by the multinationals.

Embarrassingly for Newscorp, now that Google have agreed to be more transparent, they are the only ones left on the list as the highest risk of tax avoider (Q1). You won't read that in the Australian.


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## pixel (12 May 2015)

It worries me that Labor appear determined to say No to everything, even in cases which they championed in previous cycles. Take for example plans to reduce the child support if families earn above a certain threshold. Why is Bill Shorten now suddenly in favour of ongoing welfare for Middle or Upper Class?

Similarly the planned elimination of "double-dipping", where new parents will have their PPLS payments reduced by any amount already paid by their employer. As paid parental leave is prevalent in the Public Service, much, if not most, of employer-sponsored money comes from the Public Purse anyway.

I'm looking forward to hear details of plans to close loopholes for companies and top earners. The Elephants in the Room will most likely be ignored - again: Negative Gearing and Superannuation.
And if living on traditional lands is a "lifestyle choice", why isn't sending your kids to a Private School considered the same? Not to mention the ridiculous school chaplain...


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## sydboy007 (12 May 2015)

pixel said:


> It worries me that Labor appear determined to say No to everything, even in cases which they championed in previous cycles. Take for example plans to reduce the child support if families earn above a certain threshold. Why is Bill Shorten now suddenly in favour of ongoing welfare for Middle or Upper Class?
> 
> Similarly the planned elimination of "double-dipping", where new parents will have their PPLS payments reduced by any amount already paid by their employer. As paid parental leave is prevalent in the Public Service, much, if not most, of employer-sponsored money comes from the Public Purse anyway.
> 
> ...




It's all to create a sense of crisis and constant ability to attack.  It sickens me, but unless Abbott is big enough to come out and admit that the way he behaved in opposition wasn't in the best interests of the nation, it's unlikely shorten will change tact unless voters turn on him for it.  

i just wish either side would come up with some coherent policies.  You can't argue for cost savings on the pension but leave super tax expenditures growing 3 times faster than the aged pension.  You can't have a 500 page report on housing affordability but ignore the halving of CGT and NG and how they combine to cause over investment into property.

1.5 years of the current Govt but there's been no desire for SENSIBLE reforms.  We saw too much ideology last year and now we're stuck with a lack of goodwill from the public for them to be bothered attempting much with the coming budget, and when you add in an opportunistic opposition who's following Abbott to be everyone's friend when policies cause some to be losers, you know we're borked.

Until there's an acknowledgment that part of the solution is an increase in revenue, along with better targetting of current spending, nothing will change.  I don't think anything will be done till the AAA is downgraded, then the capital flight and credit crunch will force the appropriate change upon us.


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## pixel (12 May 2015)

sydboy007 said:


> Until there's an acknowledgment that part of the solution is an increase in revenue, along with better targetting of current spending, nothing will change.  I don't think anything will be done till the AAA is downgraded, then the capital flight and credit crunch will force the appropriate change upon us.




Sadly, sydboy, it appears you're right: We have to lose it first before our pollies find themselves forced to either go the Greek way or tackle the problem head-on. Which will cause far more hardship and misery for all but the Top 1%. And even they will feel stressed when they find themselves and their kids targets of crime, extortion, ransom demands...

I have a very simple proposal: Based on the assumption that a Minimum Wage or maximum Age Pension is enough for everyone to live on, why not cap the total family support - tax concessions, child support payments, ... - to that amount. *You want more? Earn it and pay for it, or wait till you can afford it.*


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## sydboy007 (12 May 2015)

pixel said:


> Sadly, sydboy, it appears you're right: We have to lose it first before our pollies find themselves forced to either go the Greek way or tackle the problem head-on. Which will cause far more hardship and misery for all but the Top 1%. And even they will feel stressed when they find themselves and their kids targets of crime, extortion, ransom demands...
> 
> I have a very simple proposal: Based on the assumption that a Minimum Wage or maximum Age Pension is enough for everyone to live on, why not cap the total family support - tax concessions, child support payments, ... - to that amount. *You want more? Earn it and pay for it, or wait till you can afford it.*




Classic point, and relevant for those who continually castigate Labor over pink bats, is Federal funding for infrastructure.

Viewed through an economically rational prism which should a Govt devote scarce public funds to

* Melbourne east-West tunnel that was calculated to provide a return of just 45c for each $ invested

* Melbourne Metro rail tunnel that was calculated to generate a $1.20 return for each $ invested

I know I'd certainly be loathe to put my money into a project that's going to lose me half my investment, yet the Abbott Govt has said NO to rail and YES to roads and this had lead them to make poor policy choices.  Factor in the increase liveability brought about by better public transport, along with helping to achieve our carbon emissions reductions, I wonder how Abbott can justify being so wasteful?

To put it into perspective, the lose on just the Federal Govt money into the east west tunnel is in the same ball park as funding for the pink bats scheme, and I'd argue that part of the reason that electricity consumption has dropped so massively over the last 5-6 years is the fact that better insulated houses have far lower running costs.  So if pink bats was such a mitigated disaster, why do the same people remain so silent when Abbott is out trying to waste as much money?

The SMH had an interesting article yesterday where people on 150K or more a year though around 1/3 of Australians earn theat much.  the same applied for those in the 100K range.  Most people have no idea just how "poor" most Aussies really are.  It's hard to get people to understand the avg wage means you're pretty well off - in the 7th income decile - while the median income of just under 48K puts you on the border of the 4th  and 5th income deciles.  Possibly a good thing to add to tax returns is to let people know where they are on the income ladder.  It could help at the margins to make those better off have more understanding of just how much people on lower incomes are struggling with inflated rents.

Maybe we do need to bring in some form of minimum tax rate for anyone in the top 2 income deciles.  It seems crazy that people in the top few % of income earners can spend so much on tax minimisation.  There needs to be something that makes it not worth their while, and a minimum average tax rate would work fairly nicely to achieve that.

personally, a broadly based land tax on all resi and commercial property, with safety nets for the poor and pensioners, along with a financial transaction tax would help to simplify the tax system and bring in revenue with a very low marginal cost.  When we lose something like 40C in the $ trying to collect corporate tax and around 24C in the $ for income taxes, moving away from our over reliance on these taxes would be the smart way forward.


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## qldfrog (12 May 2015)

sydboy007 said:


> When we lose something like 40C in the $ trying to collect corporate tax and around 24C in the $ for income taxes, moving away from our over reliance on these taxes would be the smart way forward.



indeed, I would even argue that any tax on  income from work is as counter productive as the payroll tax;
take a step back and think:
taxing the fact you work and produce, taxing the fact you employ people;
yet people accept these seemingly without trouble
And in a way good for me:
I use the system which is imposed on me:
i have not worked 5 days per  week for years now, have a life and reduce my tax bill.
Unless starving, I refuse to work and pay more than half what I receive in tax.
And I should add I am honest so fudging my tax return legally or not is not an option for me so my very logical choice


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## Tisme (12 May 2015)

*Budget 2015/16*

Woo hoo 1.5% tax cut on profit for small companies.

On $200k profit that's a saving of $3k !!!!! That'll unleash the nation's potential .... if it's anything like most govt bonus', my guess is that will be gobbled up with new compliance arrangements that come with the saving.

Let's see how the Labor vandals handle this budget.


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## sydboy007 (12 May 2015)

*Re: Budget 2015/16*



Tisme said:


> Woo hoo 1.5% tax cut on profit for small companies.
> 
> On $200k profit that's a saving of $3k !!!!! That'll unleash the nation's potential .... if it's anything like most govt bonus', my guess is that will be gobbled up with new compliance arrangements that come with the saving.
> 
> Let's see how the Labor vandals handle this budget.




lets looks at the incoherent policies from Abbott

* Unlimited 457 visas

* removing the tax free status of backpackers.

How about we just reduce as close to 0 the pop growth from importing people till we get the budget under control and can actually afford to pay for the extra infrastructure we need from adding around 1M people every 3 years to the country?


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## Joe Blow (12 May 2015)

Here is the full text of the 2015 Budget Speech: http://www.budget.gov.au/2015-16/content/speech/html/speech.htm


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## Wysiwyg (12 May 2015)

Nothing in the budget affects me at the moment so all good. Joe's laugh is contagious.


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## Vixs (12 May 2015)

Pleased with the age pension eligibility restrictions, but disappointed at the overly generous indexation that will continue.

Overall it was nice to hear a politician talk about the future and not just the past. We need job growth, wage growth, employment security and quality infrastructure to open up the suburbs for CBD commuters without needing to spend 3 hours a day standing on a full train or bus.

If we get some of the above ticked off and parents start raising their kids not to be ****heads, we may just turn this negative attitude around!


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## qldfrog (13 May 2015)

nothing to deflate the RE bubble, that will ultimately wipe out more wealth than any measure a budget will ever take;

Well maybe it is intended, when the bubble pops, it will be a bloody exercice and the budget will have to (and will be able to) take the hard measures.
How many homeless and jobless people in the street by that time?
Anyway, "Nothing in the budget affects me at the moment so all good." ...


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## qldfrog (13 May 2015)

Vixs said:


> Pleased with the age pension eligibility restrictions, but disappointed at the overly generous indexation that will continue.



indexation on wages is what it should remain Vixs;
as per every other major countries(EU/USA], wages increase less than inflation and purchasing power goes down the drain.We will follow i have no doubt.
Thinking that indexing on wages is better than on inflation is a misunderstanding  (based on previous years here in Australia during the mining boom);
When the big R comes, the government will save billions that way.
It is NOT a gift at all!!!!


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## Caveman (13 May 2015)

I think the accelerated depreciation(threshold change from 1000 to 20000) is a good idea,though I think it should be permanent not end at June 2017.


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## prawn_86 (13 May 2015)

How will they enforce registering to pay off your HECS if you are living overseas? Data sharing between international tax agencies?

Does it then become a tax deduction if you are paying with post tax dollars?


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## Knobby22 (13 May 2015)

If you have a small business you can deduct for all items under $20k. Very generous.
Should be able to pick up an used car cheaply with all the business owners buying new ones.

What it shows me is that the Government has realised confidence is shot and they are trying to turn it around. Hence tackling the debt has been put on the burner for now.


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## pixel (13 May 2015)

Knobby22 said:


> If you have a small business you can deduct for all items under $20k. Very generous.
> Should be able to pick up an used car cheaply with all the business owners buying new ones.
> 
> What it shows me is that the Government has realised confidence is shot and they are trying to turn it around. Hence tackling the debt has been put on the burner for now.




Strip away the rhetoric, this budget feels like an apology "Sorry, we stuffed up last year. Will you forgive us and let us try again?" But will it turn the consumer sentiment around? Especially when the echo of Hockey's comments on earlier rate cuts reverberate in voters' minds...

It must also be noted that a lot of those "new measures" won't take effect immediately, but deferred till July 2017. That is especially true for some of the motherhood feel-good items. The cynic in me suspects a direct link to next year's federal election. I can already hear the election slogans, "We promised better { pick from child care/ newstart/ family allowance, ...} and if re-elected, we shall deliver!"


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## sydboy007 (13 May 2015)

It's a far cry from the rhetoric per election where every dollar of deficit was like a drop of blood cruelly taken from future generations.  The world was collapsing into a blackhole of Labor debt when it was just $18B.  Twin blackholes for Hockey maybe?

It's a shame some meaningful reform wasn't implemented, with the associated savings churned into IA vetted infrastructure.  With borrowing rates under 3% out to 15 years there's probably never going to be a better time to start building the infrastructure we need to cope with rampant population growth that both major parties support.  With project providing 20%+ returns, it would seem to be a no brainer to ramp up infrastructure spending, but then that would require a backtrack on debt is bad, surplus is good rhetoric.

The cynic in me can see the small business sector rorting the 20K immediate deduction.  It's due to end when the car industry shutters, so not sure if it's a good idea to draw what could be a lot of demand forward before it finishes when 60K+ of workers are out of decent paying jobs.

There's still no coherent narrative and policy on how to get the deficit on a sustainable path to balance.  The forward estimates are a joke.  Wages growth is at it's lowest in decades, and will continue to stagnate till we regain our international competitiveness.  The budget is predicting the ToT to plateau at a rate something like a 1/4 higher than the historical average.  Hockey has set himself up to be swanned every year as the ToT continues falling to overshoot the long term average before finally balancing out. 

hockey is also forecasting unrealistic non mining sector investment growth.  Next FY it's 4%, beating the latest ABS CAPEX forecasts which indicates oncoming falls in investment intentions.  To then predict investment growth to double to 8% the year after, when the car industry is closing down and taking a lot of the component manufacturers with it, well that's a unicorn on a rainbow too far for me.

To use the above to predict unemployment will peak at 6.5%, free lolipops for all, and a unicorn as well.

Wage growth of 2.5% also seems a bit over the top when most are receiving nowhere near that.  Possibly that's a prediction for minimum politician pay rises?

All up I see the deficit will have a 4 in front of it than a 3.


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## DeepState (13 May 2015)

sydboy007 said:


> It's a far cry from the rhetoric per election where every dollar of deficit was like a drop of blood cruelly taken from future generations.  The world was collapsing into a blackhole of Labor debt when it was just $18B.  Twin blackholes for Hockey maybe?
> 
> It's a shame some meaningful reform wasn't implemented, with the associated savings churned into IA vetted infrastructure.  With borrowing rates under 3% out to 15 years there's probably never going to be a better time to start building the infrastructure we need to cope with rampant population growth that both major parties support.  With project providing 20%+ returns, it would seem to be a no brainer to ramp up infrastructure spending, but then that would require a backtrack on debt is bad, surplus is good rhetoric.
> 
> ...




As always, fantastic thinking, Syd.

Questions/Observations:

A more politically neutral document.  Less strong positions.  A natural outcome from the acrimony of the prior year. Table thumping about a budget emergency has given way to a more realistic appraisal that we aren't exactly heading into an emergency right at the minute.  Interest payments are ~5% of revenue for 15/16.  However, social security payment increases are very real and must be allowed for.

Pro family. Keeps super untouched and commits to leave it that way for the term of the government. Stimulating small business to generate employment. Got stuff for the older vote: PBS increase, pension reform. Financed a lot by various savings from rorts around the place, closure of detention centers and East-West. Nice touch on Multinationals Anti-Avoidance. Add some more to national security. All of this looks politically easier. Aiming high previously has resulted in over-reach. What's next?  Lowered expectations. 

Private non-mining investment is wider than the matters covered in the capex survey.  For one thing, that excludes private residential and a bunch of agricultural etc.  RBA policy is clearly aimed at stimulating housing. Maybe there is something to that.

ToT is forecast to decline by another good chunk next year before flatlining.  Hard for me to say whether that makes sense or not.  Estimates on this have been wildly wrong and this has cost the budget expectations a great deal.  What would iron ore need to become to drive this back to the levels you imagine? Or, alternatively, how much more expensive must imports get in a world struggling with low-flation?  Is that reasonable?

International competitiveness is somewhat questionable as an issue keeping domestic wage pressure contained.  Our export mix hardly has any manufacturing in it.  We are supported by primary exports.  That said, the Real Effective Exchange Rate rose by more than Nominal during the boom because our unit labour cost (driven primarily by mining and related) rose strongly vs RoW.  Either the AUD has to fall a lot, or unit labour costs need to come down.  They are coming down in mining and related.  Nonetheless, most of the wages expended here are applied to non-tradeables or non-traded.  International competitiveness can also be absorbed via lower profit share from companies rather than labour. Also, over the forecast period from this year, we aren't seeing any material increase in real wages at all in the assumptions.  That is a reflection of weak bargaining power of labour, all in all. Consider that we have seen real wages growth in 2013/14 and (forecast) 2014/15 of 2.5% in a period of rising unemployment and increased spare capacity looking for redeployment (geez, I still hate my tradies...).  The CPI in these years was knocked about by currency impact on tradeables and, more recently, oil. Still, wage inflation approximated good prices.

They aren't looking to a weaker currency as a source of magic.  AUDUSD is assumed 0.77. Neither are we to anticipate a fillip from yet lower energy prices.

One thing for sure is that the budgets of recent years have been far too optimistic in their assumptions.  Maybe we will see a 4-handle with a negative sign on it in the wash up.


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## sydboy007 (14 May 2015)

DeepState said:


> As always, fantastic thinking, Syd.
> 
> Questions/Observations:
> 
> ...




ToT

thermal coal - The Budget says $66. Mac says $55. Considering China is protection it's high cost producers that means there's nowhere left for the deluge of coal on the market.  USA is trying to export unwanted coal due to cheap natural gas.  India seems to be finally boosting production as well.

Iron ore - Still further supply increases over the next 12 -18 months.  Chinese housing investment is down massively YoY with no sign of growth in the near future.  No other country can step into the demand shortfall from CHina.  Price has to keep dropping to below $40 to clear out FMG and other higher cost producers.  Roy Hill will likely be the marginal producer.

Coaking Coal - on the way down with Iron ore.  There's just no demand for it with surplus supply.  Coaking coal halved in price on a roughly 13% supply surplus last year.  Iron ore will be like 30-40% supply surplus.

All in all the Budget has been fanciful with their unicorn predictions.  Can prob see $10B budget hole just from this.

Employment growth will be anemic, due to consummer spending being weak.  Companies don't need to invest when there's already excess capacity.  Not sure how much an extra % of unemployment will affect the budget but it certainly wont help.  The only thing that might help the unemployment stats is a falling participation rate.  I tend to think aggregate hours worked is a better "feel" for how the economy is going.  More hours = more income for workers, though it may not be evenly shared if large swings from full to part time employment.

Housing - WA will be decimated, especially as supply has ramped up just as pop growth is tanking.  Sydney may survive better due to a much bigger supply deficit.  Melbourne will keep going till the Chinese stop buying dob box apartments in docklands.  The issue is renting / buying a home is a choice, and when money is tight people move into what were once spare rooms / back with parents.  In the USA what was a supply deficit rapidly turned into excess supply due to this.  

As wages stagnate, rents will too.  You can leverage income 20 times for rent like you can for houses.  I wonder how things will go once the specufestors decide capital growth wont be enough to make NG worth their while?

Household debt is around 160% of GDP.  Before the prior recession it was < 40%.  That's a scary house of cards just waiting to blow over.  Households are basically tapped out.  The banks have minimal capital to help with bad loans, and the LMI companies are even in a worse capital position.  Whn the Govt is forced to step in the AAA rating is toast.

RBA has little in the way of interest rate cuts left in the bag.  As soon as the USA indicates rate rises are on the way the banks will find their margins under pressure.  THis has already happened to a degree with them passing on just 20bps from the last cut.

To me this budget is a political con job.  Abbott and Hockey are trying to do what Labor did by predicting far better revenue than is going to happen.  This has allowed them to pander to various interest groups, but the money isn't really there.  They'd have been far better to get their forecasts closer to reality and use that as justification for some meaningful tax reform.  It may dent confidence at first, but I think once business and  people start to believe the Govt actually has a plan, we'll see things start to pick up.


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## sptrawler (14 May 2015)

Problem is Syd, meaningfull tax reform would not be passed and the media and Labor would have had a field day.

It is sad, but it is reality, the media runs the agenda. 
Therefore more bad news makes easy media copy, nothing better to fill the news, than bad news.

It is really hard to fill a newspaper and/ or t.v news hour, with "all is going well nothing to report".

Both parties suffer from the same problem, that's why Labor did sod all, also when in office.

The Henry report + the White Paper = sod all. 

Why? because all the politicians are interested in is self preservation, and the media is only interested in crucifying a politician.lol

No one with a voice, is interested in Australia.IMO


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## qldfrog (15 May 2015)

sptrawler said:


> No one with a voice, is interested in Australia.IMO



I sadly agree with you and as the voting majority is not especially smart, we will have to suffer blood and sweat before any fundamental/critical reform is ever done


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## sydboy007 (18 May 2015)

http://www.businessspectator.com.au...&utm_content=1362119&utm_campaign=kgb&modapt=



> All this great stuff is undone, however, in explanatory notes which states that the draft law specifically excludes cloud services from being captured by this new regime.
> 
> It is as if this legislation were written by the very powerful and under-radar multinational tech lobby – the very group it is supposed to be capturing. And there is a good chance that this is precisely what happened.
> 
> ...


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