The Budget for dummies: the only 9 things you need to know. In English.

When it all went down, I was actually watching a fascinating show on SBS’s Insight program about anxiety – will do a post on that soon because it is extraordinarily common – while simultaneously trying to wrangle the kids into bed. Anxiety did you say?

By the time the house was quiet, I tried to look at Twitter to see what had gone down and when I couldn’t make sense of that, I flicked on Sky news to watch their analysis. I think I watched for about half an hour and understood maybe three or four sentences in that time. Max.

The only reason I remembered it was budget night was that my girlfriend Amanda texted me to say: “Look, I’m an intelligent woman but I can’t for the life of me understand this budget shit. Can you please do a post tomorrow breaking it down into understandable bite-sized chunks????”

Given that I was incapable of dishing up said chunks, I immediately texted Mamamia contributer and political junkie Julie Cowdroy who has compiled the following cheat sheet so we can all sound informed in discussions about the budget. God love that woman.

Julie writes…..

Kevin Rudd and Wayne Swan delivered the budget last night. Don’t stop reading! We are making it easy here at Mamamia to understand what it all means. Below are some key aspects of the budget. It’s not all of them, but the main ones. There is also a list of definitions that will help you sound really smart. And remember when reviewing all of this, as Peter Hartcher from the Sydney Morning Herald said last weekend, “It’s not the economy, it’s the election, stupid.”

This “No Frills” budget is to show how the Government can deliver a conservative budget after a pretty crazy spending spree and many wasted tax dollars. But the Opposition wants to prove how it can be tougher than the Government. Pretty funny when normally in an election year, both sides are throwing cash at us. So, here are the key points.

1. RETURN TO SURPLUS

The budget forecasts that by 2012-2013 we will have a small surplus of $1billion. When Rudd and Swan delivered the budget last year, it was estimated we would see a surplus in six years, not three. A number of new taxes the budget proposes (e.g., mining and tobacco) and spending cuts (e.g., foreign aid – ugh) are all contributors to the surplus.

The Opposition argues that the return to a surplus is based on shaky assumptions and go as far as saying the Rudd government will never ever deliver a surplus. Economists generally agree a return to surplus is not outside the realms of possibility.

Australia is in very good shape despite the GFC*. (Don’t freak – read the definitions below!) Our current debt is about 6% of our Gross Domestic Product (GDP* – again, see definitions!). In Europe, many countries are seeing a debt that is upwards of 70% – some even over 100% So we’re looking pretty fine Down Under compared to the rest of the world.

2. MINING TAX

Labeled the “Resource Super Profit Tax” (RSPT). This is one of the recommendations the Henry Tax Review* gave the Government. Basically, it based on the theory that Australia should all share in the profits that mining companies are enjoying. Miners are angry about this tax and some companies have even proposed to put projects on hold and threatened jobs. The government claims this is overdramatic. It is important to note this needs to pass through Parliament before it will go ahead. To do so the government would need to convince the Senate. The RSPT is said to help the surplus although the Government insist that the surplus won’t disappear if it doesn’t pass the Senate. The Opposition argue that if the RSPT is enforced, foreign interest in Australian coal will move offshore where it may be cheaper. They also insist Australians will suffer due to increases in cost of living as the mining companies pass on these costs.

3. SUPERANNUATION INCREASE

Currently, employers are required to pay their staff 9% superannuation. The Government took the advice of the Henry Tax Review* to increase that to 12%. The current rate of 9% is said to be insufficient for Australians to retire on. Some argue it should even be lifted to 15%. 12% will give Australia one of the highest global rates of minimum superannuation contributions in the world.

4. SKILLS BOOST

Businesses are happy with the proposed $660m for skills training including adult literacy/numeracy and apprenticeships as well as VET (Not animal doctors, Vocational Education and Training). It targets blue-collar workers, where as last year, the budget targeted more university places. The under-employed and unemployed (dubbed “Gillard’s Battlers) will benefit. It will drive down youth unemployment figures. It is good for people seeking apprenticeships and diplomas as it assists people such as those who never reached Year 12. Oh, and Heather Ridout (head of Australian Industry Group) finds this whole thing “sexy”, apparently. Whatever floats your boat, eh?

 

5. SECURITY

There is lots of cash poured into our security (always important in an election year). Troops will be safer (e.g., body amour), as well as provided with better mental health care. Defence facilities will be improved as well as funding for new technology (rocket detectors and such). Our identities will be protected with new money invested in detecting identity fraud and a new passport issuing system. Oh, and our borders will be strengthened from those bothersome asylum seekers. Aid will be boosted to Indonesia and Africa as well as ongoing commitments to Papua New Guinea and Sri Lanka. Investing in overseas benefits Australia’s security (e.g., investing into Sri Lanka’s stability decreases the likelihood of asylum seekers). Some funding was cut though in the total foreign aid budget which, um, sucks.

6. SIMPLER TAX RETURNS

Where once we all kept our receipts in a shoebox and dug them out for our tax agents, the Government proposes that there be standardised tax deductions where Australians could claim a flat rate for expenses ($500 for 2012, and $1000 for 2013). Some tax agents say this will actually reduce the deductions people would claim. But they would say that wouldn’t they – under this new proposal, tax agents would get less work.

7. RENEWABLE ENERGY

The ETS* was shelved because it wouldn’t have passed the Senate. While Rudd works towards international agreement that an ETS* is the way to go, it is committed to reducing emissions with a new renewable energy future fund. Basically this is money for solar, clean coal as well as educating us on climate change. Bob Brown (leader of the Greens) thinks this is whack as it still allows the big polluters to go unpenalised.

8. HEALTH

As well as the Health Reform (the continually repeated “funded nationally, run locally” reform that all states except WA agree to), there is extra money on the table to fund GP Superclinics and primary care.  It has already promised 36 clinics, but wants 450 more (23 new ones, and the rest are existing facilities that receive an upgrade). Only a few have been completed, so why propose more? Swan simply insists that Health Reform takes a while. The health budget shows nurses lots of love too. Funding is allocated for E-health records, which means we no longer have to remember all our medical history as all our medication, test results and immunisations will be recorded electronically. This poses privacy issues for some, but is welcomed by the forgetful.

 

9. CHILDCARE

The Child care rebate (the 50% most Australian parents get back when they send their kids to childcare) will capped at $7,500. It’s currently $7,778. 97% of parents won’t notice though. Ken Henry* recommended it be wiped altogether. Good for parents that the government didn’t go that far. The Government announced it was abandoning 260 child care centres last week but is trying to compensate by improving the quality of infrastructure and staff in long day care centres. It’s not in favour of family day care centres though and is cutting off start up payments. This shows it prefers institutionalised care to family care.

 

 

DEFINITIONS

 

GDP: Stands for Gross Domestic Product, which is a measure of the total value of all of the goods and services produced in a country. Australia’s GDP is an estimated $1.2 trillion

GFC: The Global Financial Crisis caused by shonky investors that many country’s economies were built that sent the world into panic. (A whole other discussion)

Henry Tax Review: Over five years, Ken Henry was appointed along with a team to propose tax reform proposals. It was released to the Government in December 09, and to the public just last week. The government has adopted some recommendations and proposes to undertake more in the future. Ken Henry is the secretary of the Department of Treasury and was appointed by Peter Costello in 2001

ETS: Emissions Trading Scheme that places a cap on the amount of emissions companies’ use and if they want to increase their emissions, they must buy credits from those who pollute less. As time progresses, the idea is that the cap is lowered which results in a lower emissions. But it’s been shelved because the Coalition and the Greens wouldn’t pass it in the Senate

Fiscal Policy: Basically, what the Government spends (on things like health and defence), the amount if taxes as well as how much it borrows

Monetary Policy: The actions of the Reserve Bank (an independent body) that affects interest rates. It must keep growth steady. If the money supply grows too fast, inflation will be too high. If it is too slow, economic growth slows which affects the gross domestic product GDP. The Reserve Bank tries to keep the inflation rate at 2-3%

Any thoughts you’d care to share with the group regarding the budget? Oh, and while we’re talking politics, you may want to swing by the poll on the home page and vote for your preferred Prime Minister. So far, Julia Gillard is in the lead and Kevin Rudd is neck and neck with….Rebecca Gibney.