Budget 2016 Explainer: What You Need To Know

02/05/2016 6:38 PM AEST | Updated 15/07/2016 12:52 PM AEST
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Tuesday will set the scene for one of the most enthralling political campaigns in recent memory, with a federal budget to be delivered on the eve of the dissolution of both houses of parliament for a July election.

"It's not a typical budget," treasurer Scott Morrison said on Monday.

He's right. No matter how hard he tries to downplay it -- and he has tried to downplay it -- it's an election manifesto.

WHAT'S AT STAKE

Any federal budget can crush or crown a government, but this one is far more consequential than most. Prime Minister Malcolm Turnbull has been promising for weeks that he will ask the Governor-General to dissolve both the Senate and House of Representatives for a July 2 election. The federal budget, usually held in the second week of May, was moved forward to May 3 to allow the PM time to call for a double-dissolution, which the rules say he has to do by May 11. There will be, at most, eight days between the budget and the official start of the election campaign.

This budget comes at a time where the sheen of new PM Turnbull has well and truly worn off, the honeymoon period a distant and fond memory as the opinion polls show Labor either neck-and-neck with, or marginally ahead of, the government.

"What you will see is a sober, responsible, economic plan. This is not a typical Budget. This is an economic plan for growth and jobs," Morrison has said. He has been careful to try and paint it as a future plan, not simply a shopping list of election promises.

"Tomorrow night's budget will be an election document, not an economic document," countered shadow treasurer Chris Bowen.

The budget papers will be a financial roadmap for the next year in Australia, but at this stage, it's hard to see much past July.

WHAT WE CAN EXPECT

It's like the night before Christmas, when the kids ask their parents for "just one look, come on!" at the presents under the tree; just a little preview, even just one little present to tide them over until the morning.

Morrison and Turnbull have been steadfast in batting away most questions about the content of the 2016-17 budget -- at least four questions from Labor leader Bill Shorten were dodged during Monday's question time -- but key teasers have been leaked ahead of time.

Morrison has been spruiking that the budget will be about "jobs and growth," tamping down expectations of a cash-splashing manifesto. "This is not a time to be throwing money around," he said on Monday.

The treasurer has said that the economic outlook is about average, so there likely won't be many big tax concessions. We have got a few leaks about education, dental funding and infrastructure projects, though.

EDUCATION

Over the weekend, we got a preview of a $1.2 billion injection for education. The government has quietly shelved the big-ticket, $4 billion Gonski reforms to which Labor has publicly committed, and instead ponied up $3 billion less for a package over 2018-2020. The school funding is more generous than Turnbull's predecessor, Tony Abbott, has offered, but is tied to the states making commitments to keep their own education funding at pre-determined levels.

"Bill Shorten and Labor may promise more money for schools but our student achievement plan will grow education funding from its current record levels at an affordable rate, without the need for $100 billion in additional taxes," said Education Minister Simon Birmingham.

HEALTH

A large dental care package was also unveiled ahead of the budget, with $2.1 billion in new public services for children and low-income adults as part of a $5 billion dental package. The Child and Adult Public Dental Scheme (CAPDS) will see "an extra 600,000 public dental patients treated every year as a direct result," said Health Minister Sussan Ley.

But the plan was soon attacked by dental bodies and Labor, with criticisms that the plan simply shifts patients onto already long public dental waiting lists, and actually takes money from the sector when all funding measures are taken into account.

"This is the equivalent of cutting Medicare and flooding the emergency wards of Australian hospitals with more patients," Shorten said.

"The idea that you improve the dental health of children by cutting $1 billion and making all the children of Australia have to go through public waiting lists to get dental care support from the government is a dental care hoax."

NEGATIVE GEARING

With housing and tax set to be major election issues, expect something about negative gearing to make its way into the budget. As Morrison and Turnbull toured the country recently, talking up their plans to change the tax rates that investors pay on investment properties, the backlash was fierce from all sides. While the PM has publicly ruled out changes to negative gearing, don't be surprised if there is a little bit in the budget for property investors.

TAX

Morrison has repeatedly ruled out tax hikes. The GST increases, mooted tentatively several times over Turnbull's short reign, are a distant memory.

Indeed, taxes will be cut for certain segments of the population. Morrison told the Sydney Morning Herald that the company tax rate will be cut, as will taxes for those earning over $80,000. The treasurer has also hinted he will be looking to tackle 'bracket creep', where earnings do not keep up with tax rates, and someone earning a little more gets pushed into the next tax bracket without their standard of living increasing. Those earning less than $80,000, and hoping for tax relief, will be left disappointed, with Morrison ruling out any tax cuts for lower earners.

We're also likely to see increases to taxes on cigarettes.

NOW WHAT?

Well, now we wait, with just a few hours to go before observers feverishly pore over the documents before the Budget is made public in the early evening.

Check back with The Huffington Post Australia through Tuesday, as we bring you Budget 2016 -- not just the economic plan for the year, but the first true opening salvo in what will be a two-month election campaign.

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