The 2006 Budget delivered real dividends that come from sound economic management and a strong and growing economy. Tax has been lowered across the board and, especially in the case of superannuation, simplified.
Water, described by the PM as Australia's greatest environmental challenge, was a high spending priority with an additional $500 million committed to water conservation measures in the Murray Darling Basin. I will be discussing these and other initiatives at the Murray Darling Basin Commission Ministerial Council in Melbourne this Friday.
It was a good budget for Wentworth too with roads and research being stand out winners.
As you are probably knee deep (or deeper) in budget analysis already, I won't try to summarise the Budget in this newsletter. All Budget documents are available from the Budget link on my website. Don't forget to check out the series of Budget Fact Sheets dealing with all the major Budget topics, the Budget overview and the Treasurer's Budget Speech also in the downloads section.
I would also highly recommend this short paper on the superannuation changes. A more detailed paper (also worth careful study) is here.
In a nutshell
The Howard Government's 11th Federal Budget handed down by Treasurer Peter Costello estimates an underlying cash surplus for 2006-2007 of $10.8 billion (in 2005-2006 $14.8 billion). It offers personal tax cuts worth $36.7 billion over four years, and most importantly a simpler tax system.
From July 2007 superannuation benefits from taxed funds will be tax free for those over 60. Reasonable Benefit Limits will be abolished. There will be no obligation to draw benefits from funds in any particular form or at any time. People will be able to take their benefits as a regular income stream or leave it in the fund and draw down on it when required; all tax free.
Superannuation has become a complex miasma which baffles the experts almost as much as the rest of us. Lump sums alone can be taxed in seven different ways, depending on their composition. Making all payments out of super funds for those over 60 provides an enormous incentive to invest in super. It does not discriminate in favour of one kind of pay out over another and, most importantly, it does not penalise those over 60 who continue to work and receive taxable income.
The changes to Income Tax rates in this Budget are:
Ø The 30 per cent threshold will rise to $25,001;
Ø The 42 per cent marginal tax rate will be cut to 40 per cent and the threshold will rise to $75,001;
Ø The 47 per cent marginal tax rate will be cut to 45 per cent and the threshold will rise to $150,001;
Ø The low income tax offset will increase to $600 per year and phase out from $25,000 up from $21,600;
Now to two issues most dear to my heart: water and Wentworth.
$500 million for the Murray
On water, the Budget delivered with a $500 million commitment to the Murray Darling Basin Commission to enable it to undertake essential works in the Basin which will enable us better to conserve water and preserve the iconic ecological sites which are the focus of the Living Murray Initiative.
This investment - for the benefit of the environment, irrigators, industry and regional communities - complements the Australian Government's commitment of $200 million to the Living Murray Initiative, and brings the Federal Government's total investment in the Murray Darling River system to almost $2 billion since 1996.
Given the failure of the Murray Darling Basin State Governments (NSW, Victoria, South Australia and Queensland) to agree to adequately fund essential Murray Darling Basin infrastructure work, the Australian Government investment will allow the Commission to accelerate the full range of capital works across the Basin which it has identified as necessary to ensure the river system is operating at optimal efficiency.
The $500 million injection will also fund additional projects under the Living Murray Environmental Works and Measures Programme and provide additional resources to ensure the return of 500 gigalitres per annum by 2009 for the Living Murray's environmental flows.
The capital works which will now be possible include:
• Advancing construction of salt interception structures and systems to reduce salinity and maintain water quality for Adelaide, regional communities and irrigators;
• Completion of the sea to Hume dam fishways by 2011 to allow our native fish populations to reconnect along the River Murray;
• Maintenance and renewal of River Murray water delivery infrastructure, which is currently being run down; and
• New infrastructure to maximise the environmental benefits of water recovered for Living Murray initiatives, providing greater confidence that recovery of important ecological sites along the system can be achieved.
The Australian Government will also seek the agreement of the Murray Darling States and the Murray Darling Basin Commission to ensure that this investment of $500 million will deliver permanent improvements in governments' capacity to manage the Murray Darling Basin system and to meet the needs of the river system and its users.
This funding complements a new proposal I am taking to the Commission this month to accelerate the return of water to the river by inviting tenders of water to meet 2009 water targets. I spoke about this proposal in Adelaide recently and it adds to the Australian Government's commitment of $200 million to the Living Murray Initiative, and brings our total investment in the Murray Darling River system to almost $2 billion since 1996.
Wentworth Wins
Wentworth's local councils will receive double the amount they were scheduled to receive under Auslink Roads to Recovery programme. For 2006/07 Randwick City Council was to receive $387,619, Waverley was to receive $178,589, and Woollahra was to receive $173,883.
All these amounts have been doubled in the Federal Budget so that Randwick will now receive $775,238, Waverley will receive $357,178, and Woollahra will now receive $347,766. For more details click here.
The spending increase is untied which means that councils can spend this additional funding on the priorities determined by each local community. They have three years to spend this additional funds injection under the programme.
There is also an additional $58.7 million commitment to local governments across Australia this year and each individual municipality's amount will be determined by the NSW Government in late July.
Wentworth was also the recipient of one of 16 major, one-off grants to improve infrastructure of medical research facilities announced in the Budget, totalling $165 million. A $10 million grant has been given to the Childrens' Cancer Institute Australia in Randwick, which will greatly enhance the ability of this premier organisation for health and medical research in expanding its medical research facilities. This in turn will help to attract and retain top quality researchers and maximise the benefits from the research it undertakes. Click here for more details.
What a Budget! Ten years of sound economic management has seen Labor's $96 billion of Federal Government debt eliminated providing on-going interest savings of $8 billion a year which can be invested in physical and intellectual infrastructure .
There will be many challenges in the future and more than a few will be unexpected. But our nation is better prepared than almost any other to face the future because of ten years of sound economic management.
Yours sincerely,
Malcolm Turnbull MP
Member for
Wentworth