Slide 1

Budget Update

A Presentation to the Association of Independent Retirees, Tamworth

21st May 2013

Justin Baiocchi, Chartered Financial Analyst Director: Baiocchi Griffin Private Wealth AFSL .424658

Slide 2

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

This presentation and the associated discussion is

general in nature and does not take your individual

situation into account. You should not act on

anything contained herein, or discussed as a

consequence of the contents of this document, without

receiving personal financial advice from a suitably

qualified person such as a financial advisor.

General Advice Warning

Slide 3

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

What will be covered

A general overview of the Budget

and

A look at the impact on retirees, people nearing retirement and our local region

Please feel free to ask questions during the presentation

Slide 4

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

2013/14 Budget: a general overview

Not your typical election year budget… No usual freebies, handouts and bribes ahead of the election…but why?

Slide 5

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

2013/14 Budget: a general overview

No money for bribes and handouts…tax revenue for 2013/14 will be $16.6 billion less than expected. Govt. had forecast tax revenue to increase by 10.8%, instead it was 5.3%. Bad luck or bad forecasting?

Slide 6

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

2013/14 Budget: a general overview

Instead of the usual pre-election budget, what Swan delivered was…

Big Spending - $398.3 billion in government spending

and “savings”

Big Taxes - $25.5 billion in increased revenue through tax hikes,

reduced concessions, higher excise etc. $3 tax increase for every $1 in spending cuts.

Slide 7

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

2013/14 Budget: a general overview

Where the money goes (billion)

Social security & welfare $138.1

Other purposes $73.6

All other functions $47.1

Health $64.6

Education $29.7

General public services $23.0

Defence $22.0

Slide 8

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

2013/14 Budget: a general overview

Could be viewed as a ‘legacy budget’ – NDIS and Gonski

Slide 9

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

2013/14 Budget: a general overview

A look at Gonski: where the money will come from.

University funding cuts

Baby bonus and FTB cuts/changes

Business tax increases

Job losses in Public Service

Slide 10

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

2013/14 Budget: a general overview

A look at NDIS: where the money will come from.

Medicare levy increase

Assorted cuts to entitlements, health care rebate…etc.

Slide 11

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

Winners & Losers: The Winners

1. Infrastructure: $24 billion over five years to upgrade and expand urban public transport infrastructure in Sydney, Brisbane, Melbourne and Adelaide.

2. Schools/education: $9.8 billion over six years for a new needs-based funding model for schools that increases Commonwealth funding for schools to $104.3 billion from 2014 to 2019.

3. Higher education: $97 million to increase the number of Commonwealth-supported university places and an additional $186 million for research infrastructure.

4. Disability: $14.3 billion in new investment for DisabilityCare Australia, a national disability insurance scheme that will be paid for with an increase in the Medicare levy.

5. Seniors: $127 million for older Australians, including $112.4 million to support those downsizing their homes, $9.9 million to extend broadband support and $4.6 million for a new ageing policy institute.

6. Health: $226 million to fight cancer, including $55.7 million for breast cancer screening, $18.5 million for prostate cancer research and $23.8 million for bone-marrow transplants.

Slide 12

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

Winners & Losers: The Losers 1. Individuals: Personal income tax cuts to begin in July 2015 to help with the carbon tax deferred

until carbon price estimates reach $25.40. New estimate for 2015-16 is just $12.10.

2. Environment: Deferral of $370 million of funding for the Australian Renewable Energy Agency, while $225.4 million will be deferred and $32.3 million redirected from the biodiversity fund. $58 million in funding for the Clean Technology Program moved to 2017-18.

3. Resources: Tighter rules on exploration deductions for miners that give the government $1.1 billion over four years. $500 million cut from carbon capture and storage programs.

4. Multinational companies: Tightening of the corporate tax system to remove erosion and loopholes, bringing the government extra revenue of about $4.1 billion and $219.20 million in savings.

5. Foreign aid: The government will defer an increase in the aid budget to 0.5 per cent of the gross national income by one year to 2017-18, saving it $1.9 billion.

6. Families: A reduction in the time allowed to claim family tax benefits and child-care assistance will save the government $562 million over five years, while changes in the eligibility age for another tax benefit will save $76.6 million over four years.

Slide 13

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

2013/14 Budget: a general overview

Bad news for future budgets: reliance (again) on overly optimistic forecasts

LNG exports from Australia Iron ore price

Slide 14

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

The impact on you as an individual

Higher with

franking credits

Slide 15

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

The impact on you as an individual

Slide 16

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

The impact on you as an individual

Slide 17

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

Impact on Superannuation

Some of these changes were announced last month:

Slide 18

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

Impact on Superannuation

Slide 19

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

Impact on Superannuation

Slide 20

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

Downsizing help & Medicare

Slide 21

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

Our Region

The New England electorate received direct funding for a number of projects: - New England Highway Bolivia Hill realignment - $80 million

- Liverpool Plains Shire Council water strategy - $400k

- Ashford Medical Centre - $280k

- NERAM - $250k

- Acacia Park NBN rollout - $220k

- Inverell Linking Together Centre - $210k

- Inverell RSL Museum - $100k

- Werris Creek Community Shed - $80k

- Gunnedah Shire Band - $20k

Slide 22

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

The Opposition’s response

Light on detail, but general key points: - General support for the budget’s tax increases and spending cuts of $43 billion

(and no commitment to reverse the tax increases and spending cuts in office)

- Delay the scheduled increases in the superannuation contributions guarantee for two years

- Will support the NDIS, but not Gonski, unless all the states and territories have committed to it

- Promises a comprehensive taxation review (No intention to raise GST, but GST will be included in the review)

- Retain the carbon tax compensation package but will abolish the carbon tax

Slide 23

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

Summary

• Probably Wayne Swan’s best budget but perhaps too much emphasis on tax increases instead of spending cuts.

• Budget surplus forecast to return 2016/17 but this assumes revenue growth and commodity price forecasts which have a high likelihood of not being achieved.

• Given the likely outcome of the Federal election, does the budget matter?

Slide 24

Level 1, 462 – 464 Peel Street TAMWORTH NSW 2340 AFSL No. 424658

Thank you

Questions

?