How the government is planning to get us back into surplus
In what is widely perceived to be an election Budget (and certainly the last full Budget before the next federal election), Treasurer Scott Morrison said that in 2017-18 the deficit will be $18.2 billion, less than half of what it was two years ago.
The deficit will fall again to $14.5 billion in 2018-19 and is forecast to return to a modest balance of $2.2 billion in 2019-20 (a year ahead of what was previously expected) and increase to projected surpluses of $11.0 billion in 2020-21 and $16.6 billion in 2021-22.
In the lead-up to the announcements, Morrison had said the Budget needed to "exercise the restraint that has been so important in ensuring that we bring that Budget back to balance".
The Budget papers themselves state that real GDP is forecast to grow by 2.75% in 2017-18 and to accelerate further to 3% growth in 2018-19 and 2019-20, a pace the government considers sufficient to continue to lower the unemployment rate over the next few years.
The government says the underlying cash position is expected to return to a balance in 2019-20.
An underlying cash surplus is projected in 2020-21, growing to more than 1% of GDP in the medium term.
The government says these projections are consistent with its fiscal strategy, which requires that tax receipts do not exceed 23.9% of GDP through the medium term.
On the revenue front, the centrepiece of a Budget containing a wide range of tax and related measures is a major seven-year, three-step plan to reform personal income tax:
Step 1 will see a new non-refundable low and middle income tax offset from 2018-19 to 2021-22.
Step 2 will increase the top threshold of the 32.5% tax bracket from $87,000 to $90,000 from July 1, 2018. In 2022-23, the top threshold of the 19% bracket will increase from $37,000 to $41,000. The top threshold of the 32.5% bracket will increase from $90,000 to $120,000 from July 1, 2022.
As for Step 3, from July 1, 2024 the top threshold of the 32.5% bracket will increase from $120,000 to $200,000, removing the 37% tax bracket completely.
The Budget also featured an extension of the $20,000 instant asset write-off by another 12 months and a major overhaul of the research and development tax incentive.