The relief high-income earners gain from the debt levy being axed may be very short-lived as the Turnbull government considers higher health taxes.
There is speculation the government will lift the Medicare levy or extend the Medicare levy surcharge in Treasurer Scott Morrison’s second federal budget on Tuesday.
Treasurer Scott Morrison is preparing his second federal budget. Photo: Alex Ellinghausen
The rise would pay for an expected winding back of the four-year freeze on Medicare rebates for GP visits, which health advocates and Labor have described as a co-payment by another name.
Australians on incomes of over $180,000 a year are due to get relief from the cutting of the two per cent temporary budget repair levy.
But Westpac chief economist Bill Evans says another possibility to offset these measures is extending the Medicare levy surcharge to high-income earners with private health insurance.
The surcharge now only applies to those without such insurance.
The levy surcharge starts at $90,000 income for singles without private health insurance and $180,000 for families.
It starts at one per cent of income and rises to 1.5 per cent for the highest earners on more than $140,000 as a single or more than $280,000 as a family.
The measure could raise around $4 billion over four years, which could also be used to cover other government costs in the health and welfare area.
While it is understood the coalition has considered the surcharge hike, there is also speculation the Medicare levy itself – which raises $15 billion a year – could be raised above its current two per cent rate.
However, the budget papers aren’t expected to give much hope for job seekers.
The Reserve Bank forecast the jobless rate was likely to remain between five and six per cent for the next two financial years, with economic growth expected to hover between 2.75 per cent and 3.75 per cent over the same period.
While the ramp-up in liquefied natural gas production will contribute 0.5 percentage points to GDP over the next two years, it’s not expected to produce many extra jobs.
Shadow treasurer Chris Bowen, in a speech on Friday, said ensuring growth also generated jobs would depend on the government, unions, universities and business sector renewing their focus on innovation.
“We want to see innovation and smarts applied not just to open up economic opportunity – we want it to improve the quality of life in communities across the country,” Mr Bowen said.
The government argues its Gonski 2.0 schools funding plan and universities policy will have a long-term positive effect on the economy.
But it faces an internal fight with coalition MPs over funding for the Catholic schools sector as well as pressure from Labor to increase the pot of money available.
Former prime minister Tony Abbott expects the schools package will be vigorously debated by Liberal and Nationals MPs when the party room meets on Tuesday, but acting Prime Minister Barnaby Joyce said he has yet to be approached about any concerns.
Labor has seized on coalition dissent as it ramps up opposition to the government plan.
“It should be junked – any proposal that takes more than $22 billion away from our schools over the coming decade will hurt Australian children,” opposition education spokeswoman Tanya Plibersek said.
Ms Plibersek said the opposition would “fight until the last day” for the $22 billion.
How the schools package is funded will be outlined in the budget, which is set to unveil a slightly higher deficit but a small surplus in 2020/21, with ratings agencies not troubled enough by debt levels to cut the nation’s Triple-A rating.