Family payments will be slashed, the public sector hacked down and the States face long term pain funding their schools and hospitals after a Federal Budget that hopes to cut Commonwealth debt by more than $300 billion.
In his first Budget as Treasurer, Joe Hockey unveiled tonight a fiscal blueprint that could see the nation’s financial bottom line in the black within four to five years.
The coming year’s Budget deficit is tipped to narrow by $20 billion to $29.8 billion and then gradually improve to about a $2.8 billion shortfall in 2017-18.
The Government believes the lower-than-forecast deficits will mean expected debt will be $300 billion lower than the $667 billion forecast in the mid-year Budget update.
COMMENT: HOCKEY WHACKS ALMOST EVERYONE | FAMILIES, PENSIONERS FEEL THE PAIN | FIRST HOMEBUYER ACCOUNTS GO | $7 FOR DOCTOR VISITS | CORPORATE AUSTRALIA A WINNER | RESOURCES WEIGHING ON ECONOMY
The turnaround will be driven initially by a recovery in tax revenues but then a series of deep cuts that will leave no part of the nation untouched.
The biggest cumulative cuts will be in health and education, with a total $80 billion in spending to the States and Territories to be wound back over the coming decade.
In a sign the Government believes a higher GST extended to more areas may be necessary, it notes that the current white papers into taxation and the Federation will be pivotal into dealing with long term issues facing the States and Territories.
Mr Hockey said the Budget needed to be repaired with all Australians playing a part.
A stronger Budget would ultimately deliver a better economy.
“Prosperity is not a gift. It needs to be earned,” he said.
“So now it is our turn to contribute. Now it is our turn to build.”
Among the main measures, a $7 Medicare co-payment will be introduced for standard GP visits and out-of-hospital pathology and imaging.
In another blow to the sick, pharmaceutical scripts under the PBS will be increased by $5 from January.
However, the medical research field is one of the Budget’s biggest winners with a special endowment fund to be created that is hoped to have $20 billion within six years. Interest from the fund will go into research across the country.
A drastic revamp of the higher education sector was unveiled, with the effective creation of an Australian “Ivy League” that will enable universities to charge what they like for their degrees.
TAFE students will be able to access the Higher Education Loans Program.
But $2 billion that had been in the Howard Government created-Education Investment Fund will be raided, to be pumped into road funding.
Aged pensioners will have three years to get ready for a major overhaul of payments.
The twice-yearly increase in the aged pension will only be linked to inflation from September 2017. At the same time, means test thresholds will be frozen.
The Seniors Supplement for Commonwealth Seniors Health Card holders will be axed after this year’s June payment.
The single biggest immediate cut is to the foreign aid budget which will be slashed by $7.6 billion.
Another $8.3 billion will be saved by an on overhaul of Family Tax Benefit payments.
The threshold for FTB part B will be cut to $100,000 from $150,000, with payments stopping with the youngest child turns six from 2015. Existing recipients will be grandfathered for two more years.
End of year supplements for FTB part A will be cut to $600 per child from $726.35, with the base rate for the payment to be reduced once household incomes hit $94,316.
The public sector will also bear the brunt of the Government’s pain with 16,500 jobs to go on top of another 0.25 per cent efficiency dividend imposed on the bureaucracy.
Despite the pain, Mr Hockey said the Government was mindful of the economic forces now at play.
He said a major infrastructure program, which includes the proposed $1.6 billion Perth Freight Link, would offset the slowdown in the mining sector while boosting the nation’s overall productivity.
“These projects will mean real activity and real jobs in local communities. Shovels will start moving within a matter of months,” he said.