The head of a mortgage broking and financial planning group believes that the 2018 Federal Budget will be spent on “rubbish” rather than creating economic growth in key regions.
While tax cuts have dominated the headlines since Treasurer Scott Morrison’s announcement on Tuesday night, the budget ultimately revealed total expenses of $488.6 billion for the next financial year, ahead of the $486.1 billion in income.
Social security and welfare will be the biggest expense at approximately $176 billion, followed by health ($79 billion).
Other items on the federal government’s shopping list include $161 million on satellite navigation, $49 million to celebrate the 250th anniversary of Captain Cook’s first trip to Australia and $26 million to establish a space agency.
Wealthy & Wise executive chairman Scott Heathwood said that he was unimpressed with the Turnbull government’s plans.
“It’s being spent on rubbish,” Mr Heathwood told The Adviser.
“It’s not being spent on sensible areas or creating economic zones in South Australia or Tasmania or the Northern Territory or in agriculture.
“If you look at the growth in revenue since 2007, we shouldn’t have anywhere near the deficit we have now. We should be well and truly in the black. It’s just despicable.
“It’s all because we have a lazy economy and lazy politicians. We rely on immigration and natural population growth, that drives the economy, and then we either have a construction boom or a mining boom.
“Politicians can just throw bread rolls at each other for three years and have an arm wrestle and we all think we live in some democratic society because we go through the pantomime of casting a ballot every time they put a circus on. It’s just a joke.”
However, others have praised the government’s efforts to keep the budget on track for a surplus.
AMP Capital chief economist Shane Oliver believes that this has been relatively easy, given the $7 billion improvement in the balance sheet since the December mid-year review.
“Thanks to stronger corporate revenue (due to reduced tax losses and higher commodity prices), stronger personal tax revenue thanks to higher employment and reduced spending, the 2017–18 budget deficit is projected to come in at $18.2 billion, compared to $23.6 billion in the mid-year review,” Mr Oliver said.
“The government has assumed that much of this revenue boost will continue but has only used a bit of it to fund tax cuts and other measures. The net result is that the budget is projected to continue to track to a surplus — which is now expected to be reached one year earlier in 2019–20 albeit its only wafer-thin at $2.2 billion or 0.1 per cent of GDP.”
According to Mr Oliver, the move back to surplus is slowed slightly by the fiscal easing from policy changes (predominately tax cuts).
“For example, the 2018–19 deficit is projected to fall to $14.5 billion, but it would have fallen to $13.8 billion were it not for the fiscal easing.
“That said, the fiscal easing is small at 0.1 [per cent] to 0.3 per cent of GDP over the next few years, and the progressive shift from deficit to surplus will mean that it will take more out of the economy than it’s putting back in.”
[Related: Budget 2018–19 released]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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