Australian budget: What the experts say

Paul Kelly, political commentator
The second Hockey budget is driven by two forces: the need to counter the onslaught on the 2014 budget that almost destroyed the government and the $52 billion revenue downgrade since last year.

The bottom line estimates conceal the policy reversal at work. This budget’s real purpose is to save the Abbott government. The second related purpose is to boost economic activity in the teeth of faltering growth.

The big gamble in these estimates is growth. It is forecast to kick back to 3.25% in 2016-17 and keep rising, generating an easing in unemployment and lower budget deficit down the track.

Joe Hockey has staked his career on faster growth, falling jobless and small business as the engine-room of innovation and investment. The second big gamble is postponing for the future the tougher spending decisions necessary to fix the budget and ­return to surplus.

The risk is that these estimates are too optimistic, that fiscal repair remains in limbo and that without reform the economy drifts downwards.

Alan Kohler, business commentator
The key task of this year’s budget was to rebuild confidence and get businesses investing again after last year’s disastrous budget.

In a way, this had to be a sort of self-fulfilling budget – that is, it needs to create its own economic growth, through improved confidence, on which the forecasts of deficit reduction can be based which can lift confidence and produce economic growth that will reduce the deficit, and so on.

Will it do that? Well, it’s possible that in the days and weeks ahead the simple absence of nasty shocks will do the trick, as long as Joe Hockey, in particular, is up to the task of selling it.

At least the shock factor this year was nil: maybe there was something in the budget that hadn’t been pre-announced or leaked, apart from the deficit figure, but if so it wasn’t obvious.But the substance is virtually nil as well: the list of budget measures, entirely pre-announced as it was, was very, very short.

The small business tax cut is virtually pointless, a $A1 billion a year handout to family-owned shops and sole tradies that will achieve nothing. That’s because any investment or new employment that a small business is likely to make in response to the tax cut will be designed to get its turnover above $2 million a year, otherwise what’s the point, at which level the tax rate goes back to 30%.

Likewise the accelerated depreciation: it applies to assets of less than $A20,000, and that’s not even going to buy a locally made car. Maybe an espresso coffee machine for a cafe but only a cheap one.

------

See more NBR's coverage of the Australian Budget 2015 here: 

Australian budget: Deficit widens to $35bn, surplus by 2020

Australian budget: Winners and losers

Australian budget: What a difference a year makes

Australian budget: Hockey details ‘Netflix tax’, ‘Google tax’

Australian budget: What the experts say

Editor's Insight: Joe Hockey's 'have a go' budget