First Coalition budget includes $50 billion infrastructure investment plan

Federal Treasurer Joe Hockey has revealed the Coalition Government’s much-anticipated first budget last night.

As leaked before, the budget is attempting to slash by half Labor's $123 billion deficit over the next four years – forecasting a deficit of $29.8 billion for 2014/15, trimmed back to $17.1 billion the following year.

Both Prime Minister Tony Abbott and Mr Hockey had prepared Australians for sweeping spending cuts in the face of what they termed a “budget emergency” – and the final document delivered on the promise.

In order to put the budget back on the path to surplus, Australia will see an unprecedented $80 billion cut to health and education spending over the next decade.

The cuts include welfare payments to families, 16,500 civil-service jobs and almost $8 billion to foreign aid over five years. Older Australians will face tougher eligibility tests for state pensions, and the Government plans to raise the retirement age to 70 by 2035.

On top of that, changes to fuel excise from August 1 will cause the price of a litre of fuel to rise by the rate of inflation every six months.

In addition, high-income earners are hit with a two per cent ‘temporary budget repair levy’ from 1 July, and previously bulk-billed patients will have to pay a $7 fee per visit to see a doctor – leading to a widely televised public outcry.

Hockey reacted by saying the “age of entitlement” was now over. “Doing nothing is not an option. The days of borrow and spend must come to an end. It is time, for all of us, to contribute and build.”

Despite a wave of criticism, some winners have emerged from last night’s budget – including businesses, which got a 1.5 per cent cut in company tax rate; as well as unemployed people above 50, who now get help finding work from a $10,000 payment to companies that may give them a job; and mothers, who get a generous paid parental leave scheme, albeit at a lower rate than Prime Minister Tony Abbott wanted.

The budget also includes a “Growth Package” which increases the Government’s commitment to infrastructure spending over the next decade to $50 billion and is forecast to stimulate investment of up to an additional $125 billion in the sector by the end of the decade.

The infrastructure growth package includes $11.6 billion to fund initiatives like Melbourne's East West link.

All up, the budget represents a faster path to surplus than previously signalled and raises the possibility of reaching the psychologically – and politically – important balanced budget by 2018-19, according to the Sydney Morning Herald.

Business Insider went as far as saying the budget has set Tony Abbott on “the self-appointed path of becoming the infrastructure prime minister”.

On the downside, unemployment is expected to remain at 6 per cent or higher for the next three years, according to Treasurer Hockey.

Regardless of the budget’s impact on the economy, Mr Abbott faces a political battle in convincing Australians that he has not broken his promise of “no new taxes” in raising both taxes on top earners and petrol taxes.

At a glance:

  • Budget deficit: $29.8 billion in 2014-15 (to $2.8 billion in 2017-18)
  • Unemployment forecast: 6.25% in 2014-15
  • Economic growth: 2.5% in 2014-15

 

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