ALGA analysis of the 2017-18 Federal Budget

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
Page 4: Regional overview

Federal Budget 2017-18 – Key points

General overview and economic outlook:

The Federal Budget has been affected by a range of ongoing domestic and international factors. However, the stablising situations in both the United States and China, suggest the international risks might be easing. Ongoing challenges in Europe show that there remain some situations to be aware of. On the domestic front, sluggish demand from the retail sector and unstable commodity prices are impacting.

The Budget shows 2017-18 will be in deficit ($29.4 billion cash) with a $21.4 billion deficit in 2018-19, the forward estimates have a surplus of $7.4 billion (0.4% of GDP) being achieved by 2020-21. Despite a surplus not being achieved for another four years, this will be delivered well ahead of any of the major advanced economies.

The Australian economy will grow at a rate of 2.75 per cent in 2017-18 and 3 per cent in 2018-19. Unemployment projections have it remaining steady in 2017-18 at 5.75 per cent, before a small projected reduction to 5.5 per cent in 2018-19.

The Budget 2017-18 reflects the Australian Government’s commitment maintain essential service delivery and balance that with a reduction of the pressure of Budget deficits and additional debt.

In spite of the difficult financial situation, the Australian economy is forecast to retire public debt and return to an operating surplus at a faster rate than most developed economies.

Budget priorities:

The Budget 2017-18 reflects the Australian Government’s priorities, as outlined in Budget Paper No.1, these include:

  • Increasing the value of Commonwealth investment in infrastructure
  • Additional funding for regional community projects
  • Ongoing support for small business
  • Tackling cost of living pressures, and
  • Reducing expenditure to return the Budget to surplus.

Key initiatives:

  • Increasing Commonwealth investment in infrastructure to $70 billion by 2020-21 and $75 billion by 2026-27.
  • Reforms to both school funding. Increasing funding to schools by $18.2 billion by 2026-27.
  • Increasing the Medicare levy by 0.5% to 2.5% to fully fund the NDIS rollout by 2020.
  • Allowing first-homebuyers to invest voluntary contributions into super accounts to save for a housing deposit.
  • $472 million investment in a Regional Growth Fund.

Spending cuts:

The Government has identified $9.8 billion in savings over this Budget cycle and beyond, some of the larger cuts include:

  • Higher Education Reforms – increasing tuition fees and repayment thresholds for university students saving $3.7 billion.
  • Tightening the requirements for JobSeeker payments amounting to $632 million
  • Streamlining Family Tax Benefit A recipient treatment – $415.4 million
  • Efficiencies within the Department of Defence saving $304.1 million
  • Freezing international development assistance – $303.3 million

Of interest to local government:

  • Indexation of Financial Assistance Grants restored.
  • Extension of the National Partnership on universal access to early childhood education to 2018-19.
  • $50 million to determine the effectiveness of the National Indigenous advancement strategy
  • $500,000 in 2017-18 to manage development of national climate adaptation work – National Climate Adaptation Research Facility not renewed.
  • $40 million in supplementary funding in 2017-18 and 2018-19 in South Australian local roads.