LAST week’s Federal Budget raises several discussion points. The most important for Australia is: have we now permanently changed to be more of a welfare state like Sweden and the Scandinavian countries?
They tax citizens heavily and provide a high level of Government services.
Tax collections in Australia have risen from less than 20 per cent of the economy a generation ago to 26 per cent now.
Even the supposedly pro-free enterprise party is now embracing the expensive NBN, Gonski school funding plan and National Disability Insurance Scheme as essential Government services. To pay for them we are already running up large deficits.
Efforts to raise extra taxes and reduce costs have been blocked by a Senate with little understanding of what is in the best interests of Australia. Senators focus only on what is in the interests of their small voter base. The Senate is now saying there can be no increase in taxes on lower earners.
The desired welfare measures must be paid for by “the rich”. They want a tax rate of 49.5 per cent on anyone earning over $180,000 per year.
By contrast New Zealand has a top tax rate of 33 per cent. Tax them enough and they will move to New Zealand or Singapore or somewhere else where taxes are lower.
Even respected former Labor Prime Minister and Treasurer Paul Keating says the top tax rate should be no more than 39 per cent. The higher the top tax rate the worse off the country will be long term.
The Treasurer has been looking for easy targets to raise taxes from to pay these bills.
He found one in the banks which are currently unpopular with the public, and slapped a tax on their wholesale deposits and overseas borrowings. He expects banks to absorb the cost and not pass it on to customers.
He must think there is some sort of secret source of money inside banks that can be raided without affecting anything else. There isn’t. There are only three parties to operating a bank – the shareholders, staff and customers.
The unions will make sure the staff don’t pay the tax cost, and managers won’t be taking a pay cut. Shareholders have already seen share prices fall. Future bank investors will expect similar returns to companies in other industries.
They won’t pay. The customers will pay most of the tax cost.
The Budget decision to extend the $20,000 instant asset write-off will help small businesses.
Infrastructure projects such as the inland rail link will provide temporary work for businesses and be a big benefit long term.