Today, the Coalition released its 2021-2022 smart budget proposal. It intends to reduce Australia’s gross debt by half as a share of GDP and creates several new fiscal anchors. Signature Supporters Key Coalition figures estimate that they can easily cut $40 billion out of the government’s expected $1.22 trillion debt. This much-needed reduction would go into effect by the fiscal year 2028/29. Among the proposals are new tax deductions for mortgages and an expansion of military spending. In addition, there’s an unusual provisional tax offset that aims to favour low- and middle-income earners.
Angus Taylor, Shadow Treasurer to release more detailed costings of the Coalition’s plan on Thursday. What he does not mention is that their approach will produce deficits. These deficits are at least $10 billion less than what the new, current Labor government is forecasting over the next four years. These measures are a welcome relief given recent warnings from the world’s largest ratings agencies about the sustainability of Australia’s fiscal position.
Major Spending Initiatives
The Coalition’s budget strategy has a number of large financial signatures. Collectively, these investments will address challenges, create opportunity, and profoundly improve the national economy. Of these, the most alarming is a proposed $21 billion increase in military spending over the next four years. This allocation is an indicator of the increasing prioritization of national defense with the escalation of global tensions.
The Coalition isn’t only playing defense. They intend to introduce tax deductions for commercial property owners, which will increase the budget by a further $1.6 billion. On top of that, they suggest lunch deductions for entrepreneurs worth $243 million. These initiatives are just a slice of the whole pie. It includes a temporary $1,200 income tax offset that’s projected to cost about $10 billion.
The Coalition has already locked in at least $48 billion in additional spending. This contains measures for defence, relief for fuel excise and bulk billing in Medicare. The plan’s centrepiece is a very ambitious 25-cent-a-litre cut to fuel excise. This controversial step is expected to reduce $6 billion from federal revenues.
Criticism and Concerns
While the Coalition’s budget plan contained some ambitious proposals, it’s raised eyebrows and produced skepticism even among many politicos. One of those sceptics is the new Treasurer, Jim Chalmers. Climate Change Minister Chris Chalmers warned of “dodgy assumptions” in the Coalition’s costings. As one state lawmaker put it, the lack of reliability in their projections should alert voters to dig deeper into the numbers.
“When the Coalition finally gets around to releasing its costings, keep an eye out for some dodgy assumptions around productivity, pumping up their numbers.” – Jim Chalmers
Chalmers further criticized the management of the economy under the current administration, stating, “That’s not bad luck, that’s bad management,” highlighting his belief that fiscal mismanagement has led to economic challenges.
The Coalition’s proposal is released at a time when Australia is very close to losing its AAA credit rating. Ratings agencies have indicated that without substantial changes in spending or taxation policies, both sides of politics risk jeopardizing this coveted status.
Looking Ahead
David Littleproud from the Coalition has made bold promises regarding future infrastructure projects. He promised to have them begin construction of nuclear reactors before they are even elected. In light of this, today’s announcement is a major pivot in their clean energy agenda.
Federal Opposition leader Peter Dutton has been equally insistent on holding Labor to account for its net new spending commitments of at least $48 billion. Together these plans are a signal of an increasing commitment to strengthen national defense as well as tackle rising costs and inflationary pressures for Australian households.
Angus Taylor encapsulated the Coalition’s stance by asserting that their proposed solutions are designed to address two budgets: one reflecting necessary reductions and another one accommodating essential spending.
“Labor has delivered the longest per-capita recession on record and the biggest collapse in living standards in the developed world.” – Angus Taylor
