What a difference a year makes! Last May, the government didn’t even hand down the budget as the whole economy was shut down, businesses were closed and we were all stuck at home staring down the barrel of economic calamity. When the 2020-21 budget was finally released in October 2020, the final figure was a record deficit of $213.7 billion.
As we all know, Australia has come through the COVID crisis so far in quite good shape. Unemployment is a little higher than normal though nowhere near the 15% predicted, people are out spending, and businesses are making money. Some sectors of the economy are booming. This has resulted in far more tax collected and far less spent on welfare than planned. The government deficit for 2021 was only $161.0 billion.
These far better than expected numbers, coupled with an upcoming election have given the treasurer free reign to spend, spend, spend… and he hasn’t been shy. The words ‘budget surplus’ are not even in the lexicon anymore.
Generally, there are winners and losers in any budget, though the list of winners far exceeds the list of losers in this budget. In fact, it is hard to find many losers at all this time around.
One obscure group who may be unhappy are chicken farmers who will have to pay a 1.1cent levy for each laying chicken. The funds raised will be used to reimburse the Government for costs paid on behalf of the egg industry in relation to three emergency responses to avian influenza in Victoria in 2020. There is a strong argument however that we are all losers from this budget long term as the government racks up large and seemingly unending deficits which we must all pay back eventually. At some point, all our chickens will have to come home to roost.
Whilst there are big numbers and lots of spending, there are very few permanent or structural changes to our tax and/or financial systems within this budget. There are a few tweaks and changes which we will detail below, though certainly no big reforms.
Overall, this is an election budget on steroids with billions for everyone and nothing big and scary which will alienate large groups or scare the electorate.
It is hard to know how best to summarise this budget given the lack of key initiatives, though lots of individual items. We have broken our analysis down therefore into three key areas – a high level review of the big overall numbers, a summary of actual tax changes, and then a list of the key spending measures.
Rather than write everything myself this year, I have also enlisted some help from James and Chris who will provide some insight from a Financial Planning and Lending perspective.
We hope you enjoy and benefit from our analysis.