Federal Budget 2019: How spending will affect government ahead of election

Treasurer Josh Frydenberg unveiled nearly $270 billion in extra spending before even reaching the halfway point of his Budget speech.

That’s how keen the government is to give its economic statement election appeal.

It’s not something you do when you want to boast of spending cuts, but it is what you do when your strategy is to offer voters a bounty contingent on your re-election.

One of the first-half goals of Mr Frydenberg’s speech was a $100 billion infrastructure program. The Budget documents came with maps showing just about every regional polling booth would be close to a road construction site.

But income tax was the crucial measure, the promise to help families with rising living expenses while the government preened itself on its economic management.

media_cameraTreasurer Josh Frydenberg hopes his Budget will help neutralise the threat of Labor. Picture: Gary Ramage

“Our message today and over the next few weeks will be that this is not the time to change direction, this is not the time to go back to Labor’s discredited approach of the past,” Finance Minister Mathias Cormann told reporters in frank acknowledgment of the strategy.

When Senator Cormann said “the next few weeks” he meant the election campaign, which could begin as early as Sunday.

The Budget is an attractive package at first glance and harks back to a Howard-Costello Budget of the late 1990s when the fiscal war cry was “Back in the Black and Back on Track”.

But its strongest elements are based on Scott Morrison being returned as prime minister.

Go against the Coalition and you vote against plump and quickly-delivered tax cuts. That’s anther version of the Cormann message.

The government had promised $144 billion in income tax cuts. Mr Frydenberg used the Budget to add a second stage worth $158 billion to give middle-income earners on up to $126,000 a year a cut, which for a family could amount to $2160 a year. That $144 billion Stage 1 could, in theory, be delivered in time for our tax returns this July. But that won’t happen.

The government might have attempted to pass it through parliament this week — the final three sitting days before the election, but Labor might have supported it and ruined the strategy.

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media_cameraThis is Scott Morrison’s first Budget as prime minister. Picture: AAP Image/Richard Wainwright

So the extra money for pensioners to pay electricity bills, announced on the weekend, will go to a vote, but the tax cuts will be held back.

Which probably wise as Labor will have its own tax cut plans and while it might have backed the government’s Stage 1, it would not have been a pushover on Stage 2.

And while the government plays hero to the “teachers, tradies and nurses” it says would benefit from the proposed cuts, a tax bonanza is on the way to those on higher salaries.

By 2024-25, those earning $200,000 a year would be $11,640 better off under the government’s plan. In that same year, someone on $50,000 a year would have to make do with a $1205 cut.

So the big earner would have a tax reduction worth about 6 per cent of income, and the worker on the lower income one worth about 2.5 per cent.

In fact, many of the goodies of the Budget are a long way off delivery. It will be another four years, according to Budget forecasts, before wages hit 3 per cent annual growth, and national economic growth reaches the same improvement point.

And even with GDP — national economic output — at 3 per cent, we will be struggling in a global climate depressing the economic health of some of our trading partners.

But, the government assures, at least you will have a Budget surplus starting the coming financial year and soaring to close to $18 billion in three years.

So what?

Well, if the global economic outlook is as bleak as many monitors suggest, Australia might need some saved cash to ride out the danger.

Originally published as Killer strategy behind Budget splash

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