The way it really is
by Ross Greenwood
More jobs … more taxes … any speed-bumps ahead?
Lets talk about the 2022 Australian budget and what it really means for all of us.
This year the Government will collect a record $508 billion in tax from Australian workers, businesses and retirees.
As more people join the workforce – and unemployment falls to 3.75 percent … the Government will rake in even more money. $598 billion by 2025-26 – 22.9 percent of GDP.
The Government says its debt will not rise above $1 trillion until 2023-24 but as money market interest rates rise … so does its interest bill. This financial year interest will cost $17.5 billion – in proportion to the economy the same as it was before the Covid recession. But as interest rates rise, and the Government has to refinance debt … its interest bill is tipped to rise to $26 billion by 2025-26.
In other words, there’s no wriggle room in this Budget for any economic downturn … or for rising interest rates to bite the economy hard.
Petrol prices will stay high
The Budget also tells us that petrol prices won’t fall anytime soon. While the Government is highly conservative about other commodity prices: it says iron ore prices will fall – by September this year – from $134 US a tonne to $55 … coal for steel making from $512US a tonne to $130 … coal for electricity generation from $320US a tonne to $60.
So while all those forms of energy fall sharply, the Government, via Treasury, says oil prices will only fall from $114US a barrel … to $100 a barrel. In other words – we might need the short term relief from fuel excise, because the Government says we won’t see it at the pump.
And just on that excise relief 22 cents a litre … the Government has got the ACCC on the job to police petrol retailers and make sure they don’t gouge consumers.
The Government has now told us that the penalty for petrol stations that try to rip off that excise relief will be a maximum $10 million … For business, the pickings are there, but lean. And most of it is around encouraging businesses to employ even more people. $5000 for new apprentices. $15,000 for employers who take on those apprentices. 800,000 new training places.
Small business incentives
Small business that sends a worker for training will get a tax deduction of 120 cents in the dollar spent. Small business spending money on IT – cyber security; web design … whatever will again get a tax deduction of 120 cents in the dollar – up to $100,000 a year.
And there is incentive to invent more. Income from new patents will be taxed at half the company rate.
Like any Budget … you have to believe the numbers. But since the effects of the pandemic have eased … the numbers in the Budget have improved every time.
And that’s what this Budget does. It assumes Australia can keep growing; that employment will remain full; that price rises will eventually moderate. That Australia will remain prosperous … that there will be no economic shocks.
Hold your breath … cross your fingers … that inflation here and around the world doesn’t cause interest rates to rise too fast too quickly. For that is the risk that could derail this Budget … and our economy. But until then … enjoy the prosperity.
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