Back to Blog
The federal budget was handed down last night and there is generally plenty of extra money we will all be paying, whether that is through reduced payments received from the government or by additional taxes. On the whole however, there also seems to be plenty of common sense measures.
Superannuation remained relatively untouched, however they are proposing to get rid of the excess non-concessional contribution penalties. These were the ones that could see you paying as much as 93% (and in some cases higher) tax on contributions if you made a mistake and put more in than you should have. This was always a stupidly punitive measure and its about time that it was abolished.
There are some tough measures for the age pension scheme, and clients will have received our summary of these. However, while they do reduce the amount that clients receive, a simple analysis of demographics tells us why this was necessary. For example, when the age pension was introduced in 1909 the male life expectancy at birth was 55, 10 years below the age pension age. The average age expectancy of a male born now is 80 which is 15 years over age pension age. Add to this the expectation that the number of people over the age of 65 will double and those over 85 will quadruple over the next 40 years and you can see the problem. It may be politically unpalatable but it's our expectation that we haven't seen the end of these types of changes.
The water however is significantly muddled by some of the popularist comments made by competing politicians. Frustratingly, their comments grab a good headline but don't add up. Clive Palmer this morning said they would oppose the co-contribution for medicare because a pensioner on $300 per week who needed to go to the doctor every day (surely a minority) would be spending a third of their money on seeing the doctor. If we assume you are going to a 7 day medical centre then the total co-payment would be $49. The last time I studied maths, $49 was not one third of $300.
Also, why do the opposing side say that the budget measures are unnecessary because our debt levels are less than other OECD countries? If we look at the financial positions of many of these countries, I would suggest this is a fact we should be forever grateful for, not using it as an excuse for why we're doing OK. If this is the yardstick by which we are measuring financial health, perhaps we should look to aim a little higher.
So is this the budget we needed to have? Who knows. I suspect they are all lying to us. But if we are to stay the lucky country it seems to be common sense that we have to do something differently to what has gone on in recent years.