Budget 2015-16, no surprises – strong growth

With the mining sector falling both as a proportion of Australia’s GDP as well as a share of federal revenue, the property and construction sectors are poised to make up the shortfall.

Last night’s Federal Budget forecast a 25 per cent drop in mining investment next year and an additional 30 per cent in 2016/17. Despite this, GDP is forecast to grow from 2.5 per cent this financial year to 2.75 next year, and be a strong 3.5 per cent in 2017/18.

So where is the growth coming from? Treasury predicts that household spending will grow to 3 per cent next financial year and employment will remain steady, in part due to $5.5 billion in new spending on small business and workforce participation programs, the centrepiece of this year’s Budget. This includes wage subsidies for hiring eligible young job seekers, indigenous Australians, parents returning to work, people who have been unemployed for a long time and those aged and over.

But the real story lies in the shift from mining to the non-mining sectors, with mining’s share of economic growth falling from 45 per cent over the last three years to just 16 per cent over the next three years. This transition will require more policies to support continued growth in property and construction to be achieved.

The Budget confirms the new taxes to be levied on foreign purchasers of Australian property, as well as higher penalties for breaches and the introduction of a foreign land register. The new taxes will raise $735 million in revenue over four years, far exceeding the administrative and compliance costs.

 In welcome news, the Government has scrapped the GST reverse charge for going concern sales, which would have inadvertently hiked stamp duty on transactions. This decision restores certainty for investors and ensures that when commercial investments are sold as going concerns, these remain GST-free but do not trigger big new stamp duty liabilities.