You don’t know if you are dancing with the most beautiful girl or boy in the room unless you have taken the time to look around the dance floor. Similarly, there is no sense in considering the many different aspects of this budget unless we first consider the wider context of Australia’s economic health compared with other advanced economies.
So first the good news. Our overall economic outlook, when compared to other developed nations, is excellent. Whether you choose to believe it is the result of prudent fiscal management by the Rudd Government, or a strong legacy from the Howard Government, or just plain luck, is beside the point.
The facts are undeniable.
· Australia remains the only developed nation which escaped the worst of the Global Financial Crisis of 2008-9. Our budget deficit for 2010-11 is forecast to be 2.9% of GDP, compared with 6-12% of GDP in comparable economies. Other advanced economies contracted by 4% per annum while Australia’s economy grew by 1.3%per annum
· Our unemployment rate is the second lowest when compared to other major advanced economies and set to decrease to 4.75% by mid-2012.
These statistics are remarkable.
We currently are, indeed, a very lucky country. But this will only last if we manage our wealth well – and remain conscious of those who have not had the time, or opportunity, to build sufficient wealth to fund their own later years. Unless our greed is out of control, there really is enough to go around.
The tax benefit, created by the discount on interest income, and the new standard deduction for work-related expenses are heavily skewed to those whose income is less than $70,000 per annum and even more beneficial to those on $40,000 or less per annum. We believe this is entirely fair, giving a helping hand to those who need it the most.
So that’s the good news.
The bad news in this budget is really in what didn’t happen.
It is not just the responsibility of employers and the resources sector to compensate for our inability as a nation to save money for our later years. It would have been prudent to build-in incentives not only for those who like using non-super investments, but also individuals who are prepared to match their increased employer Superannuation Guarantee Contributions (SGC) as these are paid from July 2013 onwards. It’s fine for the government to highlight the lowered tax burden for many Australian workers, but if this extra income just goes on consumption, no one will be better off in their retirement. A strong incentive for a portion of this increased income to be saved makes a lot of sense. Pity Treasurer Wayne Swan, like Peter Costello before him, missed another golden opportunity.