Smokers and multinational tax avoiders will hate this budget; for most other people, there is little either particularly good or bad. For the economy, it was probably a net plus because it was different to almost every other pre-election budget: it lacked big splash cash handouts and dubious local community grants programs for marginal seats.
The main tax changes were to superannuation concessions, as the government had foreshadowed. While complex, they are carefully modelled and in net terms improve retirement prospects. The personal income tax change – moving the $80,000 bracket to $87,000 – has little impact on the average taxpayer and for those who benefit amounts to a mere $315 a year. It is not a big-taxing budget when the measure with the greatest single impact – $4.7 billion in extra revenue over four years – is increased tobacco excise.
Add a carbon price and negative gearing changes, and this could be Labor's budget. Changes to superannuation make arrangements fairer, reduce excesses at the top and improve concessions for low-income earners; the budget included money for innovation, start-ups and cooperatives, a neatly targeted youth employment scheme, and confirmation that the Clean Energy Finance Corporation is to remain. It reverses to some extent – not wholly – health and education cuts from the 2014 budget.
Company tax cuts, however, are very Coalition. They are phased in over 10 years (a good strategy, politically and fiscally) with a strong small business focus.
In turn, small businesses are expected to invest and increase employment. That is a brave assumption in an uncertain world. While it could happen, business owners might instead decide to pocket the tax cut and wait until they are sure the economy is growing strongly. Tuesday's statement by Reserve Bank governor Glenn Stevens, accompanying a 0.25 per cent cut in the official interest rate, shows he is concerned about the pace of growth and global uncertainty.
That's where the risks lie in this budget. It assumes the rest of the world continues to grow (even if only moderately), small business invests, the new tax avoidance taskforce catches multinational tax avoiders and makes them pay (worth $3 billion in estimated extra revenue over four years). Even the defence package, of which a major component is a $50 billion submarine build, assumes that unlike past projects this will come in on budget. If the assumptions fail, Australia faces a difficult recovery task. There is very little room in the budget for alternatives: expenditure remains high and net worth (an important measure of stewardship of public resources) continues to deteriorate.
The budget bottom line improves over the forward estimates. Remember, however, that every recent budget, and every treasurer from Wayne Swan on, has promised a surplus as the eventual result of budget repair measures. It has not come yet. The world changes, governments find themselves having to spend on new programs. They rarely have the courage to find savings to pay for them.
In this budget there are some real savings, mostly reallocated (for example, in infrastructure and health), some likely to be overtaken (for example, from further consultation over higher education reform) and a grab bag of usual suspects (increased passport fees, efficiency dividend, property sales). In net terms, it is a modest effort, leaving budget repair as a slow, long-term undertaking. If the Reserve Bank fears about future prospects arise, this could be just as well.