If I’ve said it once, I’ve said it at least three times: don’t take financial advice from Joe Hockey.
After the Reserve Bank cut interest rates this week to (new) historic lows, Joe covered his curlies by advising us that “now is the time to borrow and invest…now is the time to have a go”.
That’s terrible advice. Ultra-low interest rates are a sign that our economy is struggling: it’s the morning after the mining boom bender, and we could be headed for our first genuine downturn in decades. So now is actually a great time to ‘have a go’ at paying down your debts, and beefing up your savings.
Thankfully consumers don’t appear to be listening to Joe. A recent survey by the NAB suggests that our biggest cause of anxiety is actually government policy – it even trumped our concerns on the rising cost of living. And that explains why Tony Abbott has promised Tuesday’s budget will be ‘dull’.
Then again, by their very nature, budgets are meant to be dull. Case in point, when I unveil our family budget, my wife invariably gives me the stinky eye, and my son smiles and shouts “lolly!”
And in both cases, getting your budget proposal past the senate (or your wife), involves good policy, and great politics. So here are some of the options that Joe has…and the likelihood of them getting up.
Retirement Robin Hood
Okay, so this one’s already a given: the Government has already leaked their proposed Robin Hood-style changes to the pension system: in effect, wealthier pensioners get slugged, while those in the middle get an extra few bucks.
The Government is in the process of winding back the boom-time bribes that were given to older voters. Yet this has a while to go: eventually, probably in a few years, I think you’ll see the family home included in the asset test, fewer retirees getting a part-pension, and tougher rules for getting the Commonwealth Seniors Card. Chance of getting up: 100%.
Eat the Rich
The wealthiest 10% of Australians get nearly 40% of the superannuation tax concessions. As last year’s Financial System Inquiry argued, few of that bunch are ever going to get an Age Pension, so why bother giving them tax breaks?
The Australia Institute reckons the cost each year of that helping hand to the 10% richest households exceeds $12 billion – a staggering amount of money, and a number that must be making cash-constrained Joe Hockey froth at the mouth. Still, Joe’s ruled out making any changes to superannuation…this budget. Chance of getting up: 0%.
Eat the Rich (Part 2)
The Liberals went to the last election promising no new taxes, but they’ve got form – last year, they tried to sneak in a ‘Budget Repair Levy’, an additional 2 per cent whack. At the time they said it was temporary, and supposed to finish in 2017, however it’s likely to be made permanent. Chance of getting up: 80%.
Overhauling Childcare Payments
Tony Abbott wants women to like him – so much so that he stuck it to his colleagues with his gold-plated paid parental leave program (which has since been dumped). This year, he’s hoping a new, improved child care package (costing $3.5 billion) will get a better reception, although it doesn’t kick in until 2017. There’s a catch though – if the Senate doesn’t pass last year’s Family Payment cuts, then the childcare reforms get ditched. And the government is also (finally) piloting a program that subsidises nannies for households earning up to $250,000 a year. Chance of getting up: 100%.
The Google Tax
The government has confirmed that small businesses will get a tax cut, and they’re also spending millions trying to make multinationals like Google and Apple pay their fair share of tax here. Chance of getting up: 100% (chance of it actually working? 20%).
Axing Negative Gearing
This year’s hot topic, and one dear to the hearts and tax deductions of many property-owning Australians (and most federal politicians). Those in favour of changing the rules (which allow rental property losses to be deducted from other income), say $3.7 billion would be saved by ditching negative gearing. Investors claim the sky would fall in if they couldn’t write off their losses. A string of senior Liberals (all from electorates where negative gearing is almost a cult) have already ruled out scrapping it. Chance of getting up: 0%.
Chances of People Getting Their Nose Out of Joint? 100%.
I’m writing this from a hotel room in New York City.
The cabbie that drove me in from the airport said to me in a thick New Yorker accent, “you’re from England, right? Well, welcome to the best city, and the best country in the world!”
After chatting to him for a few minutes, he admitted that, like most Americans, he’d actually never travelled overseas. So he was surprised when I started telling him about life down under.
I explained that we have one of the most advanced universal (read: taxpayer funded) health care systems in the world. In the US, despite Obamacare, health care is not only prohibitively expensive, it’s also the leading cause of bankruptcy. In 2014, almost 2 million people hit the wall citing unpaid medical bills.
Yet there’s one thing that bankruptcy won’t discharge in the US: your student loan debts. The average US college student graduates with $US35,000 in debt, but unlike Australia, they don’t have the flexibility of the government-funded, income-contingent, HECS-HELP loan system.
However possibly the most confronting statistic is that in 2014, roughly one in five (46.5 million) Americans received food stamps. Australia on the other hand has one of the most robust social safety nets in the world.
So while it’s true that America has a slightly lower tax take than Australia, make no bones about it, we get our money’s worth. Yet it’s only when you get out of Australia for a while that you realise just how good we’ve got it.