Public sector underpins Turnbull's new pragmatism

By Tom Burton

May 9, 2017

The 2017-18 Budget delivers the public sector a powerful renewed mandate, with over $14 billion of direct government equity into major new infrastructure delivery and financing agencies, a buy back of Snowy Hydro, a $10 billion rail fund, nearly $500 million for a regional growth fund, plus a series of major permanent hypothecated funds to underwrite Medicare, the NDIS and training.

At the same time the government has announced major new regulatory measures, led by the Australian Consumer and Competition Commission, for banking, energy, broadband and disability, plus a raft of new corporate tax avoidance measures.

Treasurer Scott Morrison declared the budget a “practical” budget aimed at helping those who had not benefited from Australia’s long growth streak, while moving slowly to balance the fiscal books.

Declaring an end to the smaller government program introduced in 2013, Minister for Finance Mathias Cormann has committed to deliver this significantly increased government activity on similar APS staffing levels and lower departmental costs as a percentage of all government spend.

This will be achieved by ongoing functional and efficiency reviews, a new digital investment office to oversee the nearly $10 billion annual ICT spend and reducing duplication by streamlining citizen digital access, consolidating back office corporate services for a further 60 agencies and unifying grant programs to two hubs for community and business.

The 2017-18 Budget shows government spending increasing over the forward estimates from $464 billion in the coming fiscal year to $523 billion in 2020-21. As a share of GDP, spending drops slightly from 25.5% this coming year to 25.2% in 2020-21.

This is underpinned by what Scott Morrison said was better days ahead, with the Budget forecasting growth to lift to 3% next fiscal year off renewed US and Chinese growth — but weighed down by relatively flat domestic consumption.

The Budget includes a major housing affordability package, including a measure to give superannuation concessions for first home owners and a $300,000 super concession for over 65 year olds who downsize their homes.

The $130 billion Future Fund is to be locked up to stop drawdowns, with the government aiming to meet its entire public sector superannuation commitment from the fund.

The future of the new national disability scheme is secured with a permanent half a percent increase in the Medicare levy from July 2019 with funds to be directed to an NDIS Savings Fund.

The other major tax measure is a 0.6% level on the liabilities of the big banks, starting July 1, expected to raise $6.2 billion over the next four years.

In an important shift in government thinking around debt, Morrison said the government is seeking not to borrow money to pay for recurrent expenditure from 2018-19. So called ‘good debt’ would only be used to fund capital projects and payments.

The Budget announces a half billion public sector modernisation program, the centrepiece being a new Data Integration Partnership of Australia whole-of-government data analytics program to be driven by the Prime Minister’s Department. This will be supported by a federated data exchange platform for the whole government to avoid bespoke point-to-point exchanges between the big agencies. Data61 also gets extra funding for a new integrated data platform for law enforcement and regulatory agencies.

After nearly two decades of privatisation and outsourcing the government has announced a bevy of measures which has the Commonwealth taking major equity and ownership positions in key infrastructure programs. These are accompanied by a raft of new agencies and programs to deliver and finance the projects.

These measures include:

  • A buy back of the Snowy Hydro company from NSW and Victoria to give the Commonwealth control or outright ownership, to facilitate the use of dams to act as energy storage as the economy shifts to renewables.
  • $5.3 billion direct investment in a new Western Sydney Airport Corporation to deliver the second airport by 2026, with earthworks to commence late next year.
  • An equity injection of $8.4 billion to the the government-owned Australian Rail Track Corporation to build a 1700km rail line from Melbourne to Brisbane.
  • A $10 billion National Rail Program to deliver a multiplicity of urban and regional rail projects such as the Tullamarine rail link, Western Sydney Airport rail link, Brisbane Metro, and Adelink.
  • New Infrastructure and Projects Financing Agency in PM&C to use a combination of Commonwealth equity and private funds to build major transport infrastructure.
  • A $472 million Regional Growth Fund to help depressed regions.
  • A National Housing Infrastructure Facility of $1 billion to fund “micro”city deals that remove infrastructure impediments to developing new homes.
  • A new $63 million National Housing Finance and Investment Corporation to provide long-term, low-cost finance through aggregated bonds to support more affordable rental housing.
  • $90 million in energy measures to secure access to gas resources for domestic use.

There are also a raft of new major regulatory and increased oversight measures, signalling a wind-back of the red tape reduction priority of the previous Abbott government. These include:

  • A new Australian Financial Complaints Authority to administer a “banking executive accountability” regime to be administered by ASIC with extra funding of $4.3 million.
  • A permanent ACCC team to investigate competition in the banking and finance system.
  • $7.9 million for the ACCC to monitor insurance in weather-prone northern Australia.
  • A $7 million program for the ACCC to monitor NBN broadband retail providers.
  • $2.6 million to ASIC to exercise new powers over non deposit taking institutions.
  • A $16 million financial literacy program to be administered by ASIC.
  • $6.6 million to the ACCC to oversee and monitor the gas market.
  • $7.9 million to the ACCC to review and oversee retail electricity prices.
  • $4.4 million to the Productivity Commission to develop and run a COAG performance dashboard and review nationally significant sector-wide agreement with the states.

The push for greater oversight was offset by a new $300 million fund to reward states that reduce red tape for small business and barriers to competition.

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