Yahoo Finance Don’t expect a ‘spendathon’ in federal budget, Josh Frydenberg says
Josh Frydenberg says the government can deliver additional spending on aged care and mental health in next week’s budget and still deliver tax cuts for higher income earners because the government’s reforms will create “a stronger tax system”.
In a pre-budget interview with Guardian Australia, the federal treasurer also held out the prospect that taxpayers would fund a new gas-fired power plant in the Hunter Valley that energy experts say the country does not need.
Frydenberg said the government had been clear that “we want to see dispatchable energy to replace the closure of Liddell – we’ve said that”.
Related: Federal budget set to benefit from Australia’s troubles with China as iron ore price soars
Tuesday’s budget will contain significant new investments in mental health and include the government’s formal response to the aged care royal commission. With the Brittany Higgins furore eroding Scott Morrison’s support with Australian women, the budget will also contain measures aimed at protecting women, and grant programs for female entrepreneurs.
While the government has spent billions stimulating the economy during the pandemic, Frydenberg said the budget position will improve over the forward estimates as the Covid recovery gathers pace.
“The budget bottom line actually improves more from getting people into work than it does from increased iron ore revenues, although they are substantial,” he said.
Frydenberg said the Coalition did not intend to engage in a “spendathon” on Tuesday night, but investments in social services were necessary and would be significant.
“We have an ageing population, so we have increasing demand for services, at the same time, the sustainability and viability of the residential aged care sector has been put under a lot of pressure because there are a lot of loss-making providers,” the treasurer said.
“The government has a significant role to play in funding aged care and the commitment will increase on Tuesday night.”
Asked whether the commonwealth should remain the single funder of aged care, given the budget pressures, Frydenberg said that was an interesting question “but that’s not the focus of next Tuesday night”.
He signalled the increased spending on aged care would not be accompanied by significant increases in co-payments for services or means testing beyond what is already embedded in the system, although he said it was important to maintain “price signals” to help manage demand for support services as the population aged.
While scrapping the stage three tax cuts, which predominantly benefit higher income earners, would give the commonwealth billions to direct towards services, Frydenberg said the government won’t walk away from that commitment.
“That’s a significant reform. It creates a stronger fairer tax system. We took it to the last election – it’s a commitment. We are creating a stronger tax system. We’ll still maintain the progressive nature of our tax system with the tax cuts – what we’ve done is we’ve simplified it.”
Frydenberg did not directly answer a question about whether the new funding for mental health services would be accompanied by a requirement to evaluate the efficacy of the services – something that has been recommended by the Productivity Commission.
In terms of the broader budget outlook, Frydenberg said: “This is a pandemic budget. There is lots of uncertainty out there.”
“We cannot take for granted the recovery we have seen. We have to secure the recovery and that’s where the budget focus is at.”
One of the budget measures next week will promote homeownership. The government will add another 10,000 places to its first home loan deposit scheme, which allows first homeowners to buy a house with a small deposit, and increase the maximum amount of voluntary contributions that can be released under the first home super saver scheme from $30,000 to $50,000.
Asked whether taxpayers, through Snowy Hydro, would pay for a new gas-fired power plant in the Hunter Valley, Frydenberg said: “We’ve said we were going to make a decision by a certain date, and Angus Taylor will have more to say about that.”
The government has also continued to hold out the prospect of Snowy Hydro building a new gas plant at a former aluminium smelter at Kurri Kurri to deal with any power generation gap created by Liddell’s exit.
