Australia plans major spending plus surplus in 3 years

Australia plans major spending plus surplus in 3 years

An increase in the Medicare levy for all Australians, a new tax on the country's five biggest banks, and new measures to crack down on multi-national tax evasion were the centrepiece of Tuesday night's federal budget. "It does not pretend to do things with money we do not have".

On the bright side, the weighted interest rate Australia is paying for its record breaking level of outstanding debt has fallen from 4.4% in 2013 to 3% in 2017, which is the rate the government expects to pay for the next three years. But the economy has been sluggish in recent years, following the end of a decade-long, China-fuelled mining boom.

The analysts were forecasting a $7 billion increase in bank profits for the year ending June 2018, or a 7 percent increase, but noted the levy would drag down that forecast.

"This is a Labor tax-and-spend Budget, this is not who we are as a Coalition, this is not who we are as Liberals".

The budget forecast real GDP at 2.75 percent in 2017/18, strengthening to 3 percent through to 2020/21.

"It's unlikely the government will lose votes whacking a tax on big banks, although the banks will certainly squeal, and parts of the (government's) conservative base won't like these tax measures, meaning its political effectiveness depends a great deal on them sucking it up and keeping their mouths shut".

He also said he would close a loophole that has allowed 48 people in 2014/15 to pay no tax, despite earning more than $1 million a year.

The government has already announced it will bankroll the construction of a second airport in Sydney and billions of dollars are also expected to be committed to building an inland freight rail line between Melbourne and Brisbane.

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Borrowing would be limited to spending on capital works - infrastructure counted as assets and thus removed from debt calculations.

Companies hiring workers from overseas on the new temporary skills shortage visa and certain permanent skilled visas will be slugged with a levy that will go into the government's new 'Skilling Australians Fund'.

With these restrictions in place, subsequent property purchases would not be eligible for these tax depreciation deductions.

Foreign property owners will also face fines of at least A$5,000 if they fail to either occupy or lease the home for more than six months a year.

Mervyn Tang, director of Asia-Pacific sovereigns at Fitch Ratings, said the new revenue measures in the budget implied a faster reduction in the government deficit.

"The bill will provide transparency about what it really costs to run Medicare and the PBS and a clear guarantee on how we pay for it", said Mr Morrison.

Now in what looks like a significantly more generous Budget than before from the Coalition government, Prime Minister Malcolm Turnbull appears to be trying to reverse that negative reputation and make a comeback from tepid polling and a near miss at the 2016 election which severely weakened his government.