Australian Budget: Big bank and health levies, infrastructure spend up

Key points

• $A23 billion in new taxes
• Big banks slugged $A6.2 billion
• Foreign investors, workers hit

The Australian federal budget will impose $A23 billion in tax hikes on banks, workers and foreign investors, Treasurer Scott Morrison announced last night.

The surprise tax grab will hit almost every Australian worker through a 0.5% increase in the Medicare Levy from July 2019. A worker on $A100,000 a year will pay $A500 more each year. This will replace the 2% temporary deficit levy from July.

A new big bank levy that starts in six weeks will raise about $A1.5 billion a year from those with liabilities above $A100 billion. It will collect 5% of the after-tax profits from ANZ Group, Commonwealth Bank, National Australia Bank, Westpac and Macquarie Group.

Property investors will lose concessions worth $A1 billion over four years – such as the ability to deduct travel expenses for trips to inspect their rental property. Negative gearing or capital gains tax rules on investment properties are unchanged.

Fiscal policy
The federal government’s gross debt is set to peak at more than $A663.8 billion in 2020, Deficits will be scaled back over the next four years and post a $A7.4 billion surplus in 2020-21. More than half of that surplus will come from Future Fund earnings in that year.

The deficit for this financial year will be $A37.6 billion, slightly wider than the $A36.5 billion outlined in the mid-year update last December.

But the assumed update’s deficits of $A94.9 billion over the four years to June 2020 will fall to $A90.7 billion and shrink to deficits of $A45.9 billion over the four years to June 2021.

Infrastructure spending
The government will rely on a $A75 billion infrastructure programme to fund rail and road projects across the country and take full control of building a second international airport in west Sydney. The budget provides an extra $A20 billion in capital spending, on top of $50 billion announced last year.

Rail projects include an inland freight line from Melbourne to Brisbane. The Australian Rail Track Corporation will be provided $A8.4 billion in equity from borrowings. Construction on the 1700km line is scheduled to start in the 2017-18 financial year and is projected to support 16,000 jobs at the peak of construction.

In Victoria, the government plans to provide a total of $A1 billion for regional rail and other infrastructure, while $A1.2 billion will be allocated to Perth’s passenger rail network in Perth. In Queensland, the government will spend $A844 million upgrading the Bruce Highway.

Foreign worker levy
Employers bringing in overseas labour will be hit with a “foreign worker levy” ranging from $A1800 to $A5000, with the money channelled into a rebadged $A1.5 billion skilled workers fund to pay for as many as 150,000 apprentices. The levy, which the government hopes will raise $A1.2 billion from companies over four years, will replace the practice of employers committing 1-2% of their payroll to training.

Economic forecasts
The Treasury has trimmed this year’s growth forecast from 3% to 2.75%, due to Cyclone Debbie’s impact on Queensland. Growth will recover over the subsequent three years. Unemployment is forecast from 5.5% to 5.75% this year and next. Wage growth is expected to lift to 2.5% in 2017-18 and 3% the following year.