No surprises on the bumpy road to surplus
The 2013/14 Federal Budget will not be the most memorable. However, there are $43 billion worth of savings to drive the Budget into surplus by 2016/17.
The Government positioned the budget as supporting jobs and growth and building a stronger economy. “Stronger, smarter, fairer” was the catch phrase used for this budget. However, the budget deficit for 2013/14 of $19 billion (equal to 1.1% of economic output) is a stark contrast to the initial forecast of a small surplus. The Government blamed the lower tax revenue arising from the high Australian dollar and global developments.
The changes announced in the Budget are unlikely to change the Reserve Bank’s easing interest rate bias. The Government’s outlook for inflation over the next few years provides room for the Reserve Bank to make further cuts to interest rates if deemed appropriate to do so.
The superannuation changes did not extend any further in this Budget but re-enforced the announcements made on 5 April 2013.
Government announced a new initiative for seniors – a $112 million pilot to assist age pensioners to downsize their homes by providing a means test exemption of up to $200,000 for ten years.
The significant reform of DisabilityCare Australia and the increase in the Medicare Levy from 1.5% to 2% was confirmed.
The government also confirmed its commitment to the Gonski reforms for education with $9.8 billion over six years.
Added to infrastructure investment, bringing the government’s total investment to around $60 billion from 2008 09 to 2018 19.
$99.4 million investment in a new Farm Household Allowance to support farmers in hardship.
Health care measures including:
- $226million to improve cancer prevention, detection, treatment and research, and improve patient care and support.
- $33.8 million investment into the General Practice Rural Incentive program in 2013 14 to encourage medical practitioners to move to regional and remote communities.
- $691 million over five years in new listings or amendments to the Pharmaceutical Benefits Scheme.
From a financial planning perspective, the Budget also delivered some amendments to the social security and family benefit payments that may impact on clients. New family payment arrangements will replace the Baby Bonus from 1 March 2014. The Baby Bonus will no longer be available. Australians on Parenting Payment Partnered, Newstart Allowance, and Widow, Sickness or Partner Allowance will be able to earn $100 per fortnight, up from $62, before their income support is reduced.
It should be noted that most measures are proposals only, legislation is still required to be passed with possible changes and clarification to be provided.