Each year, ALGA provides an analysis of the Federal Budget with a specific focus on its impact on local government. The aim of the analysis is to provide local government with information on the total financial assistance it receives from the Australian Government as well as putting this assistance into context with the government’s overall budget priorities.
Individual fact sheets have been prepared on those topics most relevant to local government. Each fact sheet highlights major expenditures and policy initiatives.
Table of Contents
Page 1 (current page): Key points
Page 2: Financing local government
Page 3: Transport
Federal Budget 2015-16 – Key points
General overview and economic outlook:
The Federal Budget has been affected by continual revenue write-downs due largely to economic changes and instability among Australia’s trading partners and a changing focus of key industries, especially resources.
The Budget shows 2015-16 will be in deficit ($35.1 billion cash) with a $25.8 billion deficit in 2016-17 and no Budget surplus is shown in the four year estimates period. The Budget papers show that the Government expects a steady improvement in their fiscal situation over the coming years.
The Australian economy will grow at an anticipated rate of 2.75 per cent in 2015-16 with an above trend growth rate of 3.25 per cent projected for 2016-17. Despite recent volatility in the employment market, the Government is expecting unemployment to peak at 6.5 per cent in 2015-16, with a slow drop to below 6 per cent by 2018-19. 2014-15 saw a very low inflation rate of 1.75 per cent, however the Government is anticipating inflation to return to trend of 2.5 per cent in 2015-16, the Government is not factoring in any significant inflationary pressure over the forward-estimates.
The Budget 2015-16 reflects the Australian Government’s commitment to reduce the role of the Government in the economy, reduce Government spending and return the Budget to a surplus in a timely fashion, although no specific time line has been identified in the estimates.
In spite of the difficult financial situation, the Australian economy is projected to show above-trend growth as well as small drop in unemployment over the coming year. This is expected to deliver commensurate benefits to the Government’s financial situation. However, it should be noted that there was a $54 billion write-down in revenues due to the drop in the price of iron ore, more than half of the total write-downs of almost $90 billion, since the last Budget. Therefore, the Budget situation, while showing improvement, is still vulnerable to external factors.
The Budget 2015-16 reflects the following Australian Government priorities outlined in Budget Paper No.1:
- Building a stronger economy
- Supporting Australian families
- Building a fairer Australia, and
- Protecting Australia.
The Government has outlined a series of structural reforms across a number of key areas; this leads to spending increases in some areas but also significant cuts in others.
$10.9 billion in additional major savings measures have been identified over the estimates period.
- Adjusting the assets test for the aged pension – $2.4 billion
- Reforms to existing welfare payments – $1.6 billion
- Parental leave reforms – $1.5 billion
- Changes to medications covered under the PBS – $252 million
Human and Social Services
- New ‘Families Package’ – $4.4 billion in new measures, including:
- Reforms to childcare and income support payments;
- Extension of the National Partnership on Universal Access to Early Childhood Education, and
- Increasing the means test for eligibility for youth support payments.
- Extending the National Partnership on Homelessness – $230 million
- Reversing the 2014-15 Budget decision to institute longer waiting periods for young people before collecting income support payments.
- Changes to PBS listings – $1.5 billion over four years
- Reversing the decision to reduce the Medicare rebates for GPs – $2.9 billion over the estimates
- New ‘Jobs and Small Business Package’ – $.5.5 billion in new measures, including:
- $3.3 billion in tax cuts for small businesses over four years, and
- $1.75 billion to expand accelerated depreciation for small business.
- $800 million to establish the Northern Australia Infrastructure Facility
- $203 million to extend the Tasmanian Freight Equalisation Scheme
- $22.5 million per year for a Stronger Communities program, and
- An additional $50 million in Community Development Funds.
Further issues of interest to local government:
- $179 million increase in funding for Green Army projects
- $33.7 million for four years for the Remote Airstrip Upgrade
- $1.8 million to provide financial counselling for those living in drought affected areas
- $250 million to continue drought-specific concessional loan schemes
- $325 million in savings over four years due to the better targeting of the tax offset for ‘Fly in/Fly Out’ and ‘Drive in/Drive Out’ workers, and
- $104.8 million to create the National Programme for Excellence in the Arts.