Archive for April, 2019

29 April
Comments Off on Boat arrivals cost blows out by $3.2b

Boat arrivals cost blows out by $3.2b

Federal budget 2013: Full coverageSwan puts surplus on holdWinners and losersFederal budget at a glanceTreasurer Wayne Swan’s budget speech

The asylum seeker budget has blown out by more than $3.2billion since the government’s February forecast, as Immigration Minister Brendan O’Connor admitted the  record rate of boat arrivals ”is not acceptable in terms of the risks to human life, or the impact of the budget”.

On top of the $3.2billion extra required to intercept and detain asylum seekers arriving by boat – as well as caring for those  in the community – the government will channel an extra $943million in foreign aid money to supporting asylum seekers over four years.

Australia will divert the foreign aid funding to caring for asylum seekers on Australian soil, capping the amount at $375 million a year.

The budget for the 2013-14 year alone will be $2.8billion, and the government calculates that in the four years to 2015-16, it will spend $8.1billion on asylum seekers.

But the government will also be forced to beef up funding to cover legal expenses increasingly incurred by the Department of Immigration and Citizenship fighting court challenges lodged by asylum seekers against their negative refugee determinations in the courts.

It has allocated an additional $16.6million over two years to help the department fight challenges.

The government will launch a ”comprehensive” review of the refugee determination processes, conceding that a significant  number” of negative findings were being overturned in the courts.

About three-quarters of cases taken to the Refugee Review Tribunal were overturned on appeal between July last year and March.

Mr O’Connor told Fairfax the review would examine how other countries that accepted asylum seekers, including Nordic countries and the US, judged whether people were genuine refugees under the Refugee Convention.

”We accept that we need to abide by the Refugee Convention,” he said. ”We don’t believe we should be doing more than that.”

Mr O’Connor said Australia must be ”warm-hearted but hard-headed” in allocating its 20,000 humanitarian places, and said, while he sympathised with their plight, Australia could not afford to give those places to economic migrants.

He said ”no more powerful message” could be sent to would-be economic migrants than the forced return of more than 1000 failed Sri Lankan asylum seekers. The government will try to develop similar arrangements with other asylum seeker source countries.

The government will also spend $65.8million over four years redoubling its efforts to reduce the flows of asylum seekers to Australia with the support of neighbouring countries. The money will be spent on improving co-operation with asylum seeker origin and transit countries, including Indonesia, and will be used to increase asylum seeker registrations, to reduce the incentive for displaced people to get on boats for Australia by giving them extra humanitarian help in their current countries, encouraging people not found to be refugees to return to their home countries, and to strengthen its capacity to prosecute people smugglers.

Other measures include:$205.8million to combat the current rate of people smuggling to Australia by equipping the nation’s border agencies to manage the expected flow of irregular maritime arrivals.$88.6million to strengthen co-operation with border agencies in our region.$84.8million to increase Australia’s border patrol capabilities, including increasing our maritime and aerial surveillance presence, helping agencies respond to issues such as people smuggling and illegal fishing.

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29 April
Comments Off on Labor to leave with at least some dignity

Labor to leave with at least some dignity

Michael Gordon: Hedging wedgingAdele Ferguson: Politics not economicsMalcolm Maiden: Price cycle taking Swan for a rideTim Colebatch: More pain than gainRoss Gittins: Labor chooses brave way out

“I don’t make mistakes,” said the British motor racing commentator Murray Walker. “I make prophecies which immediately turn out to be wrong.”

Wayne Swan has framed his sixth and, probably, final budget in this spirit of unapologetic insistence.

But, while last year’s prophecy of a $1.5 billion surplus putrefied into an expected $18 billion deficit, Swan is very unlikely to be around when Tuesday’s prophecy starts to rot.

He is surely hoping that his latest prophecy of a “pathway to surplus” in three years can survive a mere 123 days to the next election. Because this year’s budget is based on the same dangerously brave central assumption as last year’s.

With bookies giving odds of 90 per cent that the Coalition will win the election, it will quickly become Joe Hockey’s problem.

“Swan has always chosen the most optimistic assumptions, and then spent all the money based on it,” observes Bank of America Merrill Lynch’s economist, Saul Eslake.

The fatal assumption? Swan and his Treasury last year prophesied that the economy would grow at 5.1 per cent. This is not the inflation-adjusted growth that’s usually described as “real” growth. It’s the economic growth that the Tax Office extracts taxes from, the growth in the economy that we all live and work in, the “nominal” economy.

In Tuesday’s budget the Treasury said that it now expects this will actually be 3.25 per cent. This may seem like a small difference to quibble about, a mere 1.85 percentage points.

But it’s the main reason that last year’s prophecy was so dramatically wrong. It accounts for about $9 billion in revenue that “vanished” from the budget this year. And now Swan and the Treasury have done it again, predicting nominal economic growth of 5 per cent or more in each of the next four years. Of course, they might turn out to be right. It’s just very unlikely.

“As John Howard had windfalls in his later budgets, this Treasurer and the next will have shortfalls,” says a former Treasury budget analyst, Stephen Anthony, of the consultancy Macroeconomics.

It’s just that this Treasurer is plainly hoping and expecting that it will be the next treasurer who has to deal with it.

Still, this budget could have been worse. In a standard election year, it would have been.

A government heading to likely defeat typically is tempted to try to buy its way back into the people’s hearts. This is exactly what the Howard government did.

But once the electorate has turned against a government, handouts, bonuses and cash splashes will not impress it. The election bribe does nothing but waste money. Kevin Rudd led Labor to power denouncing Howard’s recklessness and promising to spend less.

The Gillard government gets credit for resisting this standard political impulse. It has fought back the rising political panic. Or perhaps it has resigned itself to the reality that it is most unlikely to win.

Even the national headquarters of the Labor party itself is planning to lose – it has budgeted that it will receive public funding at the election based on winning 32 per cent of the primary vote. In other words, it is running its internal budget in expectation of a wipeout.

This budget sets the Gillard government up for an exit with something it has rarely shown – a modicum of dignity.

Instead of disappearing beneath the electoral landslide desperately waving a fistful of dollars, the government is acting with remarkable restraint.

Faced with yawning revenue shortfalls, it has cancelled a planned tax cut, dumped a planned increase in family payments, and dreamt up no new handouts.

Instead, it has risked even greater unpopularity by dispensing with the baby bonus, a piece of populism that deserved to go in these straitened times.

It has imposed some new taxes on companies, and especially on multinationals, that are defensible and reasonable. And it has decided to increase the Medicare levy from 1.5 per cent to 2.

The government is not going to the election empty-handed, however. It does have two offerings, and they are enormous – the extra schools funding that will amount to about $5 billion a year when fully deployed, and the DisabilityCare scheme that ultimately will cost another $10 billion a year.

But while they are enormous, they are also practical investments in national wellbeing. There is a big question of timing – whether this is the right moment to create big new spending schemes? But they are quality schemes nonetheless.

One result of the government’s overall restraint? There is net new spending in the first year of this budget of a scant $700 million. For an election year, this is commendably responsible.

Where there is life, there is hope. The Gillard government is still hoping that its budget will wreak some mischief for Tony Abbott’s opposition.

For a start, Labor knows that the Coalition has had spirited internal arguments about trimming the cost of the baby bonus. Where the government had earlier proposed prudent trimming, the Coalition had been unable to bring itself to endorse this.

Labor trusts and hopes that the Coalition will erupt over whether to accept or reject the budget decision to do away with the baby bonus.

Likewise, the government expects that, now that it’s announced how it will pay for the schools funding and DisabilityCare, the opposition will be forced into declaring its position. Abbott will have to either accept Labor’s plans, or find difficult new savings of his own.

Overall, Australia is better served by a government hoping to force the opposition into error by matching responsibility than by outbidding irresponsibility.

Swan’s advertised “pathway to surplus through responsible savings” is highly vulnerable to forecasting error, or prophecy failure. But the budget does look to be Labor’s pathway to defeat with dignity.

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29 April
Comments Off on Howard baby bonus out but $2.4b in savings is in

Howard baby bonus out but $2.4b in savings is in

baby baby

The Gillard government has dumped the baby bonus, one of the Howard government’s signature reforms, and replaced it with a less generous scheme.

Fewer stay-at-home mothers will now qualify for a lump-sum payment on the birth or adoption of a child and those that do qualify will receive thousands of dollars less. The baby bonus will be replaced by a one-off increase in Family Tax Benefit Part A.

Under the bonus, which will be scrapped on March1 next year, stay-at-home mothers in families with incomes of up to $150,000 received a $5000 payment on the birth or adoption of their first child and $3000 for each subsequent baby.

But now $2000 will be paid for the birth or adoption of a first child or each child in multiple births, and $1000 for second or subsequent children. Families will receive an initial payment of $500, the remainder to be paid in seven fortnightly instalments.

The threshold at which families qualify for the baby bonus will drop considerably. Under the new scheme couples earning over $101,000 will not be eligible for a payment for their first baby. The threshold for a second baby will be about $112,000.

The budget papers said the new scheme “more closely reflects the essential costs of having a baby and better targets this assistance now that Australia has a national paid parental leave scheme”.

Women who receive the government’s paid parental leave while having a baby are not eligible for either the baby bonus or its replacement.

The budget also made changes to the government’s paid parental scheme. At present women must work for 10 of the previous 13 months to qualify for the government’s paid parental leave. This is known as the work test period. Now parents will be able to count time on government-paid parental scheme where it occurs in the work test period for a subsequent child, just like employer-funded parental leave can be counted now. This change will mean more women will be able to access government paid parental leave when they have another baby.

Mr Swan said the changes would improve the sustainability of the family payments system.

Economist Chris Richardson, from Deloitte Access Economics, said scrapping the baby bonus was good policy.

“We now have policies to support parents that are better because they achieve the same purpose in better ways,” he said.

Mr Swan confirmed the government would not proceed with an increase to Family Tax Benefit Part A that would have added up to $600 a year for families with children. The government announced last week that the payment, due to apply from July 1 this year, would be scrapped because of an unexpected shortfall in revenue. This will save the government $2.5billion over the next four years.

The government will freeze the top income thresholds at which families qualify for family payments and supplements for three more years. This will maintain an upper-income test limit of $150,000 for Family Tax Benefit Part B, the dependency tax offsets, the Paid Parental Leave Scheme and Dad and Partner Pay.

Also, from the beginning Family Tax Benefit Part A will only be paid to families up to the end of the calendar year in which their teenager is completing school. Families will have one year, not two years, to lodge their Family Tax Benefit entitlement or Child Care Rebate. Changes to family payments will save almost $2.4 billion.

29 April
Comments Off on Super changes create $800m saving

Super changes create $800m saving

Federal budget at a glanceTreasurer Wayne Swan’s budget speech Full budget 2013 coverage

The government expects to save more than $800 million from the recently announced changes to the taxation of superannuation over the next four financial years, but has largely quarantined the $1.5 trillion sector from further changes in the federal budget.

The budget papers show that savings from April’s politically fraught changes to taxation of super will be $821 million over the four years to 2016-17, compared with estimates of $900 million.

The budget does not include any changes to negative gearing, capital gains tax, first-home buyers accounts, or reduced taxes on savings accounts.

Groups including accounting body CPA Australia have argued for a cut on taxes on deposit accounts to encourage national savings and reduce the country’s reliance on superannuation.

But the budget does forecast revenue of $130 million over the 2016 and 2017 financial years from the transfer of lost super accounts to the Tax Office.

The budget shows a technical amendment to the Low Income Superannuation Contribution – which provides up to $500 for people earning less than $37,000 to compensate them for tax paid on super – will cost $15 million over five years. But the Coalition has vowed to repeal the payment due to Labor linking it to the mining tax.

The Superannuation Complaints Tribunal will receive $2.6 million over four years, to be offset by an increase in the levy on Australian Prudential Regulation Authority regulated super funds.

There is a one-off payment of $3 million to establish a Tax Studies Institute at the Australian National University and $5.4 million set aside over four years for financial literacy measures.

Following Treasury warnings on the ballooning cost of super tax concessions, Treasurer Wayne Swan and Financial Services Minister Bill Shorten in April announced a ”modest” package of super change, one Mr Shorten has described as getting the balance right.

These were imposing a 15 per cent tax on the earnings above $100,000 from retirement accounts, and making people earning more than $300,000 a year pay 30 per cent contributions tax instead of the 15 per cent paid by everyone else.

From July 1 this year, anyone aged 60 and over will have an increased concessional contribution cap of $35,000 from $25,000. From July 2014, the higher cap will apply to anyone aged 50 and over.

Further changes, recently put into draft legislation, are taxing excess concessional contributions at a person’s marginal tax rate, plus an interest charge, following complaints by the super industry and self-managed investors of exorbitant penalties for exceeding contribution rates.

Other personal finance changes include reducing payments for new parents, a freeze on the indexation of various family payments, and reducing the amount of time a family can be temporarily overseas and still receive payments from three years to one.

The government added that despite the 0.5 per cent increase in the Medicare levy to help pay for DisabilityCare, ”Australians will be paying $19.7 billion less in tax in 2014-15 than they otherwise would have under the tax scales in place when the Coalition left office”.

29 April
Comments Off on Military the big winners, but jobs cull continues

Military the big winners, but jobs cull continues

THE PUBLIC SERVICEMilitary expands, though civilian agencies will lose another 1262 full-time staff next year.Frontline agencies such as Centrelink and Medicare to cop the most job losses.Crackdown on overly spacious offices, unnecessary air travel and duplication of services such as accounting and HR.Study commissioned to examine the benefits of a centralised, government-wide pay deal.

The Gillard government has softened its squeeze on the bureaucracy, though it will continue to cull public service jobs.

The government says it will employ about 750 extra full-time-equivalent staff in 2013-14, yet that growth is confined to military personnel.

Civilian agencies, such as government departments and statutory authorities, are expected to lose 1262 full-time employees over the next 12 months.

The continuing cuts follow an austere year for federal public servants. Most workplaces were forced to offer redundancies during 2012-13 to accommodate Labor’s economy drive.

Finance Minister Penny Wong says she will now focus on culling middle management and the top ranks of the public service – the mostly Canberra-based staff who earn more than $100,000 a year.

However, the budget papers suggest Centrelink and Medicare, which are the bureaucracy’s biggest employers of junior, lower-paid staff, will cop most of the job losses.

The two frontline agencies are part of the Department of Human Services, which has been told to reduce its 30,000-strong workforce by 1341 full-time employees.

The department is already struggling to shed staff as a result of cuts imposed this financial year, and was forced to delay its voluntary-redundancies program because it was too costly.

In contrast, two workplaces that have been among the fast-growing over the past decade – domestic spy agency ASIO and foreign aid manager AusAID – will continue to expand, albeit marginally.

Further changes to the way public servants work loom as part of the government’s hunt for $580 million worth of new savings over the next four years.

Senator Wong has already unveiled a crackdown on overly spacious government offices, saying she wants to reduce the target amount of space per worker from 16 to 14 square metres. The last audit found most staff had more than 20sqm.

She hinted agencies might, after a preliminary study, share corporate services such as accounting and human resources.

The government will also buy more videoconferencing equipment, to cut the money public servants spend on air travel and accommodation.

“We have driven efficiency reforms across government, including in travel, advertising, property management and IT,’’ Senator Wong said.

‘‘Our approach is in stark contrast to the opposition, who would slash public service jobs by 20,000 and threaten the services Australians rely on.’’

The budget also funds a two-year study of the costs and benefits of rationalising the federal bureaucracy’s maze of wage agreements.

Presently, the salaries of public servants who are employed at the same level can differ by tens of thousands of dollars, as a result of the more than 100 different pay deals.

The Community and Public Sector Union has campaigned unsuccessfully for years to return to a single, centralised wage deal that covers all government staff.

The budget also reveals plans to introduce a standard government contract for all goods or services valued at $200,000 or less, in an effort to cut wasteful spending on legal services.