2017 federal budget explained: 6 things you need to know

10 May 2017

What will the 2017 federal budget mean for you? From housing affordability and major infrastructure spending to the Medicare Rebate Scheme and tax breaks, University of Sydney experts share their insights on the budget.

1. Housing affordability issues to continue

“In last night’s budget, the federal Treasurer effectively took the most obvious strategy to fix Australia’s housing affordability crisis off the table," reflects Professor Peter Phibbs from the School of Architecture, Design and Planning

An urban planner and expert in housing research, Professor Phibbs said the 'Game of Homes' was likely to continue: "Almost the entire housing policy community has endorsed the strategy to reduce demand by winding back the tax concessions for investors through negative gearing and a generous capital gains discount."

Parliament House in Canberra, Australia, at sunset.

Professor Nicole Gurran, also an urban planner from the School of Architecture, Design and Planning, echoed Professor Phibbs' analysis: "The Treasurer’s budget and ‘housing package’ signals a change in the policy narrative around Australia’s chronic housing affordability problems.

"But there is little change to actual policy settings which have fuelled high housing demand, with negative gearing and capital gains tax arrangements largely untouched."

2. Higher education reforms an 'opportunity missed'

"The federal government’s Higher Education Reform Package represents both a disaster averted and an opportunity missed," said Vice-Chancellor and Principal Dr Michael Spence.

"While we welcome a number of measures including the decision to take the 20 percent funding cuts proposed by his predecessor off the table, the package means that students will be paying more, and universities will be receiving less, neither of which is good for a knowledge economy.

"Obviously this is bad news for students. It increases their contributions without giving us resources to provide additional bursary and accommodation support. As I have been advocating publicly for some years now, more must be done to support the living costs of students for whom university is a financial struggle."

3. Value for money essential for major infrastructure

"It is sensible that the federal government takes responsibility for large infrastructure projects such as Sydney’s new airport at Badgerys Creek, the Inland Rail and the various freight rail projects promised throughout Australia," said Dr Geoffrey Clifton from the University of Sydney Business School.

Motorway at night.

"These are nation building projects that will relieve pressure on Australia’s aviation network and our congested cities and highways," said Dr Clifton from the Institute of Transport and Logistics Studies in the Business School.

“These projects will boost regional areas and outer metropolitan areas of our cities that have often been left behind. However, it is essential that we get value for money from these infrastructure projects. This means careful cost benefit analysis and tapping the private sector for investment and expertise in efficiently building and running this infrastructure.”

4. Welfare reforms leave the poorest at risk

"There are a range of measures in the 2017-18 federal budget that offer little hope for some of the poorest and most vulnerable," explains Dr Amanda Elliot from the Department of Sociology and Social Policy.

"Those on working age income support payments will experience increased surveillance and compliance measures, some will be drug tested, others forced to engage in 50 hours of ‘activity’ a fortnight on top of job search requirements. Failure at any or all of these will see payments reduced or suspended. 

“There was no commitment in the budget to increase the levels of income support received by the unemployed. This is a payment where even a few dollars a week would make a significant difference in people's standard of living." 

5. Crackdown on multinational tax avoidance not enough

An internationally recognised expert on the taxation of corporate groups, Associate Professor Antony Ting highlights the loopholes in taxation law that still remain after the handing down of the budget.

The government's proposed measures to address international tax avoidance by multinational enterprises (MNEs) are a welcoming move. However, they are not enough.
Associate Professor Antony Ting, University of Sydney Business School

"A major loophole remains in the tax law. MNEs are still able to claim excessive interest deductions by creating artificial internal loans between group members.  

“For example, Chevron has been claiming more than $1.8 billion interest deduction on intra-group loans every year, though the group as a whole does not incur any third party interest expense. The tax law should be strengthened to prevent MNEs from claiming interest deductions in excess of their ‘real’ interest expense.”

6. Glacial pace of healthcare reforms

“There is little in this budget that is forward-looking and positions the healthcare system for the needs of the 21st century," said Dr Lesley Russell, an Adjunct Associate Professor from the Menzies Centre for Health Policy.

Different types of pills.

"The Turnbull government has spent a lot of money to reverse the damages inflicted by previous budgets; they can claim to have reversed the Medicare Benefits Scheme (MBS) freeze, but at a pace so glacial that many Australians will continue to face growing out-of-pocket costs.

"These undermine the universality of Medicare, despite the government’s eagerness to legislate their commitment to this.

“A vision for the future and real reforms are shockingly absent in the budget: the Health Care Homes project has been delayed, although it will now include community pharmacy; the Medicare Benefits Schedule Review has continued funding, but only for three years.”

Katie Booth

Media & PR Adviser (Business School)

Facts & figures

Facts about university funding

  • 'Efficiency dividend' The government will apply an 'efficiency dividend' of 2.5% in 2018 and 2019.
  • $2.8 billion savings The government plans to achieve $2.8 billion in savings over the next 4 years.
  • EIF to be abolished The budget confirmed the government's intention to abolish the Education Investment Fund (EIF)

Facts & figures

Facts for students

  • 7.5% fee increase Student fees will increase by 7.5% by 2021 - an increase of up to $3,600 for a 4-year course.
  • Lower threshold for repayments Graduates will have to start paying back their loans at a lower threshold ($42,000 compared to $55,864).
  • Per-student contribution to fall The 7.5% fee increase means the government will cut the per-student contribution it makes to universities by the same amount.

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