The Government’s first budget last May predicted that the deficit last year would be $26 billion. This estimate proved way off, the deficit instead coming in at $41.1 billion. The Government’s second budget, released last week, predicts the deficit this year will come in slightly lower, at $35.1 billion.
It doesn’t see revenue exceeding spending any time soon, though the gap is supposed to shrink to just under $7 billion by 2018-19. This will largely be due to an increase in revenue: receipts are due to rise by 1.6% of GDP between now and 2018-19, whereas spending is predicted to fall by just 0.6%. 80% of the increase in receipts will come from “bracket creep” – as inflation lifts people’s nominal wages, more people will enter higher tax brackets.
This will mean that, in real terms, people on lower incomes will be hit with an increase in taxes: the average income tax will rise from 21.7% to 27.4% over the next decade. In contrast, corporate tax is rising slowly. Whereas taxes on individuals will grow 8.5% in 2016, receipts from companies are expected to grow just 0.3%.
The increase in taxes for those on lower incomes follows huge tax cuts for those on higher incomes over the last decade. Research by The Australia Institute has shown that between 2005 and 2012, tax cuts cost the budget bottom line a total of $170 billion, 42% of the cuts benefitting the top 10% of income earners. The bottom 80% of income earners got only 38% of the cuts. Without this loss of revenue government debt in 2012 would have been $60 billion rather than $230 billion.
What about the budget’s treatment of tertiary education? The title of an article in The Australian’s budget special more or less sums it up: ‘University sector hit by ad hoc fund cuts’. Research funding has been cut in various ways, the Government even deeming it necessary to cut its $1 million yearly grant to the website The Conversation.
There’s also bad news for indebted students: there’ll be no escaping HECS debts by moving overseas anymore. $26 million is forecast to be recovered over the next four years from overseas HECS debtors, though it will cost the Government $3 million in implementation costs to do it.
Understandably defence is a winner. The price of freedom is eternal vigilance, and vigilance is useless without weaponry. In dangerous times like these, it’s important that the State maintains the capacity to arm itself, even if this involves sacrificing, say, the education of its citizenry.
Duncan Wallace is a second-year JD student, and Managing Editor of De Minimis.