April 6th 2019

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Articles from this issue:

COVER STORY The NSW election and our incredible shrinking farming sector

SOCIETY The pervasive and pernicious online porn epidemic

CANBERRA OBSERVED Coffers are full but Treasurer will take spending cautiously

OPINION Judge treats Cardinal Pell to a spot of 'open justice'

NATIONAL AFFAIRS NSW Liberals re-election gives a boost to Morrison

ECONOMICS The Great Dragon uncoils all around the globe

INTERNATIONAL AFFAIRS President Donald Trump: an unlikely promise keeper Part 2

REFLECTION On the conviction of Cardinal Pell

FICTION Orange Years: The Japie Greyling Story

TERRORISM Lessons from Christchurch

ASIAN AFFAIRS Xi's imperious play prompts U.S. to repair Asian friendships

YPAT Getting with the program: one young person's story

MUSIC To market, to market, to sell a good song

CINEMA The LEGO Movie 2: Building a world

BOOK REVIEW A template for living alongside the world

BOOK REVIEW Catholic Maryland and early tolerance



THE BUDGET Take your tax cuts and be merry, for tomorrow ... is another day

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Take your tax cuts and be merry, for tomorrow ... is another day

by NW Contributor

News Weekly, April 6, 2019

The 2019 Budget delivered by freshly minted Treasurer Josh Frydenberg, together with Opposition Leader Bill Shorten’s Budget-in-reply speech, focused largely on tax cuts and short-term lures to the electorate at the expense of any solid plan to secure Australia’s long-term future.

The country’s short election cycle, the revolving-door leadership malaise and the parliamentary gridlock of the past decade continue to take a toll; and this means that ministers are thinking in short time frames rather than serious long-term policy development.

Of course, Labor has brazenly presented a radical overhaul of the tax system, virtually abolishing negative gearing and introducing much higher capital gains taxes, as well as making a cash grab on share dividend payments.

However, these are really just big revenue-raising measures rather than proper tax reform.

The long-term economic consequences of Labor’s plans are still unclear, but there is little doubt that they will harm capital formation in this country. In other words, there will be less appeal in investing in Australian listed companies and far less appeal in investing Australian property as means of building wealth.

The latter may not be such a bad thing because the national pastime of getting rich in “bricks and mortar” does create a distortion in the economy (although the family home will remain a tax haven). But Labor’s combined measures will lead to more people looking overseas to find investment opportunities.

Awkwardly, Labor does have a long-term plan on climate change, but there is a danger that this will be a handbrake on the economy in order to “do our bit” to fight global emissions.

Labor’s push for 50 per cent electric cars sold by 2030 will necessitate a substitute for fuel excise revenue, which will net $12 billion for the federal coffers each year for roads and highways.

Electric cars will still rely on our 70 per cent coal-fired electricity system, so won’t be totally “clean”, but, because they won’t be using petrol, they won’t be paying the fuel excise.

Someone will have to pay for the roads to be built.

Meanwhile, on the Government side, infrastructure has joined health, defence and welfare in the big-spender federal portfolios club, and this year’s Budget went to a new level again with a record $100 billion over 10 years in a massive rolling infrastructure plan. This includes an additional $23 billion of new funding in the 2019–20 Budget.

It is a lot of money and a big federal government commitment to this particular area of spending. This is especially so as Finance Minister Mathias Cormann has been putting an efficiency squeeze on so many other areas of government in order to keep a lid on government spending and get the Budget back into the black.

According to the minister largely responsible for the spendathon, Deputy Prime Minister Michael McCormack, since 2013–14 the Coalition has committed $145 billion to new and upgraded road and rail projects across the country.

However, it could be argued that there is no cohesive national plan but rather a group of big, chunky projects and a whole lot of smaller ones, many of which appear to be tailored towards marginal seats.

A lot of the infrastructure spending is being thrown at “busting congestion” in the east coast capital cities, which have experienced a population explosion in recent years.

The Urban Congestion Fund has been given $4 billion to tackle traffic bottlenecks, including $500 earmarked for a Commuter Carpark Fund so commuters can park their cars and ride to work.

In defence of the Government, there are genuinely two important constituencies to serve: cities suffering from population growth shock; and the regions, with their vastly competing needs.

The regions benefit from investment in 25 key freight corridors to connect agricultural and mining regions more efficiently to the nation’s ports, airports and transport hubs.

Every state benefits from the huge infrastructure spending in the Coalition’s Budget.

However, absent from the Budget (and even more so in the Opposition’s reply) is any cohesive plan to decentralise the population, a comprehensive water plan, or any plan to ensure Australia’s energy security. Very fast trains that have been discussed forever to connect the major population hubs remain but a pipe dream.

Meanwhile, China continues to work on the biggest infrastructure planning of possibly any epoch. It not only includes re-engineering its own vast country but, with the extraordinarily ambitious “Belt and Road” plan, includes transnational super electricity grids and a highway system that stretches from Spain to Indonesia.

A skeptical reader might wonder where the funding for all this infrastructure is going to come from. Well, If the Coalition or the ALP were to commit to an Australian Infrastructure Investment Bank, similar to the one the Chinese have made for Asia – and as the NCC has been promoting for quite some years now – the funding would cease to be a problem, and cease to be a drain on the budget.

The closest either Mr Frydenberg or Mr Shorten came to addressing the question, was Mr Shorten’s promise to take a bipartisan approach with the Coalition in any negotiations with Infrastructure Australia. Not much; but a faint flame has been lit for the future.

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Last Modified:
April 4, 2018, 6:45 pm