On May 12 the Federal Government will unveil its second budget — one that is expected to be far different from last year’s “budget repair job”.
While Prime Minister Tony Abbott and Treasurer Joe Hockey have stressed the new budget will be “dull and routine”, there are several areas which are expected to see significant changes.
Below are nine things to watch out for come the announcement.
The fairness test
“The Government’s unfair budget” has been Bill Shorten and the Opposition’s most oft-repeated soundbite.
So successful has the accusation been that last year’s declaration — “the age of entitlement is over” — has given way to a much softer budget mantra: 2015 will be “measured, responsible and fair”.
It is arguably by this criteria that the document’s political success will be judged.
Debt and deficit emergency
Last year’s budget was framed as a response to dire economic circumstances.
Faced with a reluctant Senate, the Government has been working to convince voters that it can afford to go easier this time around because “much of the heavy lifting has already been done”.
But some reports suggest the budget will reveal public debt surpassing half a trillion dollars within two years.
Iron ore and revenue
The Government has foreshadowed an iron ore price as low as $35 a tonne.
Flat wages growth means lower income and company tax receipts.
Last week’s Deloitte Access Economics’ budget analysis predicted a deficit of $45 billion.
Report author Chris Richardson put it rather simply: “At some stage spending needs to be cut and taxes need to go up”.
The Treasurer has announced a joint effort with Britain to tackle multinational corporations’ profit shifting.
It does not hurt voters and is politically popular (Labor has a similar policy).
On the GST, there are reports of plans to extend the tax to so-called intangibles — things like internet downloads of movies, music and software.
Small business and jobs
The Government has promised a 1.5 per cent tax cut for an estimated 800,000 small businesses.
The outstanding question is how it will be applied.
Cutting the company tax rate will not help because the vast majority of small and family businesses are not companies.
The Government has been grappling with the question of how to define a small business for months.
It will announce its answer on Tuesday.
Welfare spending accounts for a third of the total budget.
In February, the Government received a comprehensive review of the welfare system from Patrick McClure.
He recommended crunching more than 20 benefits and a myriad of supplements down in to five key payments, alongside some upfront cash to get jobs for those at risk of long-term welfare dependency.
Expect to see some elements of this plan.
“No changes to superannuation in this term of Government” is the Prime Minister’s promise but there is growing political consensus around the need to tighten some of the tax breaks.
The welfare lobby, whose proposals the Government is examining, argues that 10 per cent of income earners receive one third of the concessions.
But last week Mr Hockey revealed he was not keen to make changes.
“Now is not the time to hit superannuants who are facing potentially many years of lower returns,” he said.
With a co-payment for visiting bulk-billed doctors now “dead, buried and cremated”, Health Minister Sussan Ley has turned her quest for $3 billion in savings to the top end of town, specifically big pharmaceutical companies.
The Pharmaceutical Benefits Scheme looks set to change the way drug prices are calculated, to the detriment of the drug companies and the benefit of taxpayers.
Largely free from domestic political pain Foreign Aid made up a significant portion of last year’s budget savings.
Foreign Minister Julie Bishop has fought hard to insulate that part of her portfolio from further cuts, but last week said the future foreign aid budget was “a matter for the expenditure review committee”.
The comments represent a marked departure from her previous stance as they came in the wake of the Bali Nine executions, after which has strained Australia’s relations with Indonesia.