The much-touted tax reform package in Treasurer Scott Morrison’s first budget looks like being no more than an outline for the future, some experts are predicting.
Chartered Accountants Australia and New Zealand head of taxation Michael Croker believes a reforming budget doesn’t appear to be happening.
“We hope there is a plan for a plan,” he told reporters in Canberra.
Treasury is understood to have successfully convinced the Turnbull government to introduce a staged reduction in the corporate tax rate to 25 from 30 per cent now, similar to that undertaken by the UK government.
But Mr Croker concedes the treasurer has quite a balancing act in the May 3 budget with credit ratings agencies like Moody’s Investors Service breathing down his neck to come up with a credible path to a surplus, something that tax cuts won’t help.
Royal Bank of Canada head of Australian and New Zealand economics Su-Lin Ong agrees, particularly when the government will probably need to borrow a further $80 billion next year.
“We would not be surprised if the ratings agencies step up their rhetoric and signal some disappointment on budget night,” Ms Ong said in the bank’s budget preview released on Wednesday.
At the same time, the government’s budget mantra of jobs and growth could start to look a bit flaky heading into the likely July 2 election.
New figures suggest economic growth has lost momentum after its acceleration late last year, while demand for new workers continues to fade.
Westpac’s leading indicator of economic activity has slipped to its lowest level since 2011 and points to below average growth rates at least until the middle of the year.
The Department of Employment’s monthly vacancy report also showed job advertisements on the internet fell by a further 1.5 per cent in March.
These disappointing results came as Mr Morrison played down further talk that the budget will contain changes to superannuation taxation.
“People speculate about what’s in the budget every year, it’s common pastime here in Canberra,” the treasurer told Sydney’s 2GB radio about reports the government will cut the income threshold for more heavily-taxed contributions from $300,000 to $180,000.
The measure, that could raise $2 billion a year in net revenue, would trump Labor’s plan to reduce the threshold to $250,000.
Labor frontbencher Richard Marles was surprised by the government’s apparent backflip having said there was no need to do anything in this area when Labor announced its policy last year.
“The only thing you can be certain of is where we lead, they follow,” he told Sky News.
Financial Services Council boss Sally Loane hopes that this budget puts an end to the persistent tinkering of the super system
She says any changes to the tax treatment of super should do something to increase the sustainability of the system and get the bulk of Australians to a point where they can save for an adequate retirement.
“If they change tax levers to do that, we are supportive of that,” she told AAP.