It is always a bit of a head-scratcher when it comes to Government budgets and where they think an additional $72 billion in taxes will be coming from, on top of $456 billion collected in the 2019 year. The chances of them hitting their targets is about the same as mine hitting the dartboard at our Christmas party, but in a time-honoured tradition, like me, they give it a go.
Heads-up, you’re paying for most of it. Half of it ($36b) is coming from individual income taxes. Buy something on your credit card, or Afterpay – $10 billion on GST, have a drink (wine tax) – not too bad – $200m. Also we are not buying as many luxury cars now-a-days. Whilst taxes on things we enjoy doing, like driving (petrol/diesel taxes), smoking (tobacco taxes), beer and buying imported goods (customs duty) make up a fair proportion of the rest of the tax increases.
So, our tax system pretty much relies on individual income taxes and consumption taxes. Problem is that if the economy ever slows, unemployment rises, incomes decrease and consumption falls.
The government has forecast the Luxury car tax to fall 2.6% in 2019-20, but the October 2019 numbers show that the annual decline is already 6.5%. Goods and Services tax is budgeted to increase 1.3% this year but similarly, the October figures already show a 1.3% annual decline.
The IMF is forecasting Australia’s economy to grow at 2.26%, but on a per capita basis it is only forecast to rise .66%, underperforming the major economies. Household incomes are stagnating, reflected in decreasing GST receipts, falling car sales and increases in savings.
Other than maintaining a high immigration programme as a substitute for economic growth, the Government is continuing their budget surplus mantra, expecting the RBA to do the heavy lifting by dropping interest rates and goosing the housing and debt markets.
It is probably likely that the asset bubble will continue to inflate, but the outcome will be binary, you will just have to be first out the exit.