Federal Budget 2017

9 May 2017


“Fairness, security and opportunity”
In a Budget targeted firmly at the political middle ground, Treasurer Scott Morrison has relied on tax rises for all working Australians to restore the country’s economic credentials. Whilst this is a much more credible path to surplus than the unpopular spending cuts of the past, it is by no means a traditional Coalition approach.  The key tax rises include $8 billion over 4 years through a permanent 0.5 per cent increase in the Medicare levy to fund the gap in the National Disability Insurance Scheme (NDIS), and a $6 billion tax on the wholesale banking activities of the big four banks (plus Macquarie).

With the remaining “zombie” measures from the 2014 Budget being axed, and the more than $14 billion increase in tax, the Government’s revenue to GDP ratio is forecast to grow to 26 per cent in 2020-21 – the highest for a Coalition Government in a generation.

The Budget deficit for 2017-18 is forecast to increase by $29.4 billion, a slight increase on last year’s estimate, and is forecast to return to a surplus of $7.4 billion in 2020-21.  Despite the Treasurer claiming that there are signs of improvement in the global economy, there is no change in the Budget’s economic growth forecasts, with GDP for 2017-18 remaining 2.75 per cent and 3 per cent in through the out years.

Most importantly, this Budget seeks to shore the Government up in areas it has traditionally trailed the Labor Opposition: Medicare and health spending; education policy and funding; its approach to the big 4 banks; and housing affordability.  In health, they are lifting the freeze on MBS indexation and reversing the removal of the bulk billing incentive on diagnostic imaging and pathology services; and legislating a Medicare Guarantee Bill. In education, whilst seeking a greater contribution from tertiary students, they are increasing school funding by $18.6 billion.

The big four banks (plus Macquarie) will face what amounts to a tax on profits of over $6 billion, and a new Financial Complaints Authority.  The Government has also decided to “own” the housing affordability debate with measures to promote housing supply, affordable housing, curb foreign investment, and encourage older Australians to downsize.  It will also seek to increase the buying power of first home owners by providing deposit savings with the same tax treatment as superannuation savings.  It also rules out any Labor-style changes to negative gearing or capital gains tax.

Whilst spending in this year’s Budget may be viewed as high, it is certainly well-targeted in terms of economic impact.  Small businesses will continue to benefit from an immediately write off of expenditure up to $20,000 for a further year, and incentives to state governments to cut red tape; and infrastructure spending will be boosted by $75 billion over the next 10 years.  The main projects include $5.3 billion on establishing the Western Sydney Airport Corporation to build and operate the new Western Sydney airport; and the option for the Commonwealth to acquire a larger share or outright ownership of Snowy Hydro from the NSW and Victorian State Governments; $844 million will be used to upgrade the Bruce Highway; and a $10 billion National Rail Programme to deliver metropolitan and regional rail projects.

Regional Australia gets a good share of new infrastructure funding with $8.4 billion to build Inland Rail, and a new $472 million Regional Growth Fund.  Equally, national security gets a boost with the Government bringing forward its commitment to increase defence spending to 2 per cent of GDP by three years to 2020-21; and the AFP receiving a further $300m to tackle terrorism, organised crime, child exploitation and other crimes.


  • The budget predicts an underlying cash deficit of $29.4 billion, or 1.6 per cent of GDP, in 2017-18.
  • The deficit is projected to fall to $21.4 billion in 2018-19, before a projected return to surplus in 2020-21.
  • GDP is expected to grow by 2.75 per cent in 2017-18, lifting to 3 per cent thereafter.
  • Net debt is estimated to be 19.5 per cent of GDP in 2017-18, peaking at 19.8 per cent in 2018-19.
  • Net debt is projected to decline as a share of GDP to 8.5 per cent by 2027 28.
  • Unemployment is predicted to be 5.75 per cent in 2017-18.
  • CPI forecast to remain low at 2 per cent in 2017-18, before rising to 2.5 per cent by 2019-20.
  • Wage Price Index is expected to be 2.5 per cent in 2017-18, and to rise steadily to 3.75 per cent by 2020-21.



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