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2017 BUDGET OVERVIEW

Wednesday, 10 May 2017

The Turnbull Government’s second Budget contains surprisingly large tax increases in the form of a rise in the Medicare Levy rate on all taxpayers except those on the lowest income and a new $1.6 billion a year special tax on the large banks.

The Budget jettisons billions in welfare ‘zombie measures’ and delivers a small surplus of $7.4 billion by 2020-21.

The Budget represents a turnaround in the Government’s approach, with new tax to support additional spending, including on school education and infrastructure.

The Government announced a number of Budget measures to address homelessness and housing affordability including a number of financial measures to support low income housing and first home buyers. But in his Budget speech Treasurer Scott Morrison acknowledged “There are no silver bullets to make housing more affordable.”

The government has hit the big banks with a $6.2 billion levy over four years and increased the Medicare levy, which is added to the income tax of all but the lowest paid, from 2 per cent to 2.5 per cent.

The Medicare levy increase begins on July 1, 2019, after the next federal election and will raise $8.2 billion in its first two years, which the Government said will be quarantined to fully fund the National Disability Insurance Scheme as well as Medicare.

Medicare will now be funded from a newly legislated Medicare Guarantee Fund, which will also be seeded by a quarantined portion of income tax. The Government has also reversed $2.2 billion in Medicare and bulk-billing cuts.

More than 92,000 pensioners who lost their concession cards when changes to the age-pension assets test saw them lose their pension, will get those cards back, though they no longer receive any pension.

The Medicare levy increase and the new bank tax will raise three quarters of the extra $20.7 billion in taxed to be levied over the four years to 2020-21.

They will just cover the decision to jettison $13.5 billion in welfare zombie measures and higher education cuts.

Mr Morrison conceded the government could no longer keep the zombie savings in the budget because the ratings agencies no longer believed the savings.

The budget forecasts a deficit of $28.7 billion in 2017-18, narrowing to a $7.4 billion balance in 2020-21. It also predicts a small recovery in wages growth, climbing to 3 per cent in 2017-18 and increasing each year after that.

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