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2017 Federal Budget Wrap

Government Affairs, News, Public Affairs

Last night Treasurer Scott Morrison handed down his second budget, and in doing so many commentators say he has finally removed the Turnbull government, and Liberal Party, from Tony Abbott’s deeply unpopular 2014 budget.

Introduction

Last night Treasurer Scott Morrison handed down his second budget, and in doing so many commentators say he has finally removed the Turnbull government, and Liberal Party, from Tony Abbott’s deeply unpopular 2014 budget.

The Australian Financial Review noted that yesterday’s budget spends big, taxes big, builds big, and belts the banks. With major spending announcements on infrastructure, schools and the NDIS, as well as tax hikes on the big banks and foreign investors, some commentators have been quick to label it a ‘Labor tax dream’.

While the Turnbull government has won praise for bold spending measures focused on stimulating growth in the right areas of the economy, the prime minister has already been forced to defend ambitious GDP forecasts, which project a $7 billion surplus by 2020/21. Tony Abbott’s former chief of staff Peta Credlin has criticised the Turnbull government for losing its focus on debt reduction and deficit repair with new and higher taxes and heavy spending on infrastructure, education and health.

But with a headline grabbing measure targeting the banking sector – one of the few ‘new’ announcements in a widely pre-briefed budget – Scott Morrison ensured a broadly positive reaction in the morning’s papers.

Now the hard work begins.  While Labor are left trying to criticise policies they effectively proposed, there is significant proportion of coalition politicians who crave fiscal responsibility and reduced deficits, and will need to be convinced of the merits of higher spending and taxes.

The Edelman team have summarised the main developments by sector:

 

Infrastructure 

After Mr Morrison announced last month that infrastructure spending represented ‘good’ debt, it was no surprise it formed a central pillar of this year’s federal budget.  The proposed decade long $75 billion spending spree already being referred to as the most ambitious infrastructure spending program in a generation.

The major announcements included:

  • Investing $5.3 billion over ten years to build the new West Sydney Airport at Badgerys Creek. By creating the Western Sydney Airport Corporation, the government will take full control of building and operating Sydney’s second airport. With earthmoving work to begin next year, the airport is planned to be fully operational by 2026. The project will lead to the creation of 20,000 jobs by the early 2030s, and 60,000 jobs in the longer term.
  • On top of a planned $2 billion upgrade announced earlier this year, the budget outlined to offer to buy the NSW and Victorian combined 87% stake in Snowy Hydro, which could cost the Commonwealth up to $5.25 billion.
  • A $10 billion program to upgrade Australia’s rail network, focused on improving urban and regional services and upgrading critical freight lines. The east coast of Australia will see $8.4 billion in funding for the Melbourne to Brisbane rail project.
  • $1 billion for regional rail projects across Victoria, including $30 million to develop a business case for a rail link to Tullamarine Airport. The Treasurer has signaled that funding could also be available for AdeLINK, Brisbane Metro, Cross River Rail in Brisbane, and the Western Sydney Airport Rail Link.
  • Establishing the Infrastructure and Project Financing Agency to help the government identify new financing solutions and provide advice on implementation.

 

Financial Services

Australia’s banks have been dubbed the biggest losers of this year’s Federal budget, with the Turnbull government introducing a major bank levy for the ‘Big Four’ plus Macquarie.  This was one of the few policies that had not been announced before yesterday’s budget, so received widespread media coverage – particularly as the banking industry has responded furiously while commentators have suggested customers may be left to foot the bill.

The major announcements included:

  • A banking levy on those with licensed entity liabilities of at least $100 billion from 1 July 2017.  It is predicted to raise $6.2 billion and will be calculated quarterly on an annualised rate of 0.06 per cent to raise just over $1.5 billion each year.
  • The Australian Competition and Consumer Commission (ACCC) has been tasked with ensuring the levy does not come out of customers’ pockets, and can force the top five to explain any changes or proposed changes to residential mortgage pricing.
  • In response to the Ramsay Review, the creation of the Australian Financial Complaints Authority, a “one stop shop” for complaints and for Australians to resolve disputes and obtain binding outcomes from the Banks and other financial institutions.
  • A new Banking Executive Accountability Regime which will require all senior executives to be registered to APRA. If executives breach their obligations they can be deregistered, disqualified from holding executive positions and stripped of their significant bonuses. If banks try and hide misconduct or breach misconduct rules they will face fines starting at $50 million for small banks and $200 million for large banks.
  • A permanent team within the ACCC will be set up to investigate competition in the banking and financial system.

 

Housing

Leading up to last night’s budget announcement, housing and affordability continued to be a focus of discussion for the Federal government.  With house prices surging in Sydney and Melbourne, a significant proportion of the community has been priced out of private rentals and sales leaving some to claim that the Australian dream of owning a property is becoming just that, a dream.  To address this, the government introduced a number of measures but stopped short of fully reforming negative gearing, which critics say is one of the main drivers behind housing affordability issues.

It will be interesting to see how this affects the government’s virtually impossible challenge of making housing more affordable without reducing the value of people’s homes – an almost guaranteed vote-loser.

The major announcements included:

  • From July 1, those looking to buy their first home will be able to contribute up to $30,000 into their superannuation account to buy their first home. Dubbed the “First Home Super Savers Scheme”, it will attract the tax benefits of superannuation, with contributions and earnings taxed at 15 per cent, rather than marginal rates, and withdrawals taxed at 30 per cent below their marginal rate although some economists have previously questioned this type of initiative, warning it may increase demand and push up house prices even further.
  • Australians aged 65+ are also being offered tax incentives to sell their homes and downsize, in a bid to boost the supply of housing for younger people. From July 1, 2018 they will able to deposit $300,000 from the sale of their home into their superannuation accounts, as a non-concessional tax contribution, regardless of how much super they already have.
  • Negative gearing rules are being tightened around what can be claimed, specifically travel expenses and depreciation deductions.
  • Focus on building more homes to increase capacity and ease affordability issues. Measures in the budget include working with states and territories to reform planning and zoning laws, opening up surplus Commonwealth land for development, and establishing a $1 billion National Housing Infrastructure Facility to “address infrastructure chokepoints that are impeding housing development in critical areas of undersupply”.  

 

Tax Overview

The government used the budget to reaffirm its commitment to cut the company tax rate to 25%, whilst proposing measures aimed at reducing red tape and easing tax burden on small businesses. A statement accompanying the budget outlined that a 25% company tax rate would increase competitiveness, attract investment, and protect jobs from being taken overseas. However, there were tax increases notably the bank levy and for individuals through the Medicare Levy.

In addition to the bank levy outlined in the Financial Services section, the major announcements included:

  • A new tax for businesses hiring foreign workers – $5,000 upfront for each foreign employee on a permanent visa for companies with a turnover exceeding $10 million
  • A continued crackdown on multinational tax avoidance and profit shifting with a toughening of the Multinational Anti-Avoidance Law, and a renewed crackdown on the back economy
  • For small businesses, the popular $20,000 instant asset write off facility for businesses with a turnover of less than $10 million extended for another year, while states and territories will receive up to $300 million in exchange for reducing red tape for small businesses
  • Increasing the capital gains tax discount from 50% to 60% for residents who choose to invest in affordable housing. Foreign investors are the biggest losers, with a new tax aimed at those who leave their building unoccupied or unavailable for rent for more than six months of the year. The CGT withholding rate for foreign residents also increases from 10 per cent to 12.5 per cent and the withholding threshold will be reduced from $2m to $750,000.
  • A significant increase in the Medicare Levy to 2.5 per cent for every Australian earning over $21,655, an increase of 0.5 per cent that is expected to raise $8.2bn over four years (see further details in Health)

 

Technology and Innovation

Whilst the government has come under fire since last year’s election campaign for losing sight of its innovation agenda, Scott Morrison used the budget to outline the Coalition’s ongoing focus on boosting Australia’s digital infrastructure.  The government allocated $350 million over three years to incentivise to modernising the public service.  However, the tech sector has reacted with disappointment suggesting budget initiatives do little to put the government back on track when it comes to innovation.

The major announcements included:

  • $10.7 million will be allocated to build a Cyber Security Advisory Office, which will be established by the Digital Transformation Agency over the next four years
  • $22.7m has also been allocated to complete the next stage of development for GovPass – the digital identity framework which links to existing document and facial verification services to provide secure proof of identity on online government services.
  • A funding boost to the CSIRO’s digital research network, Data61, to develop a data integration platform to support law enforcement and regulatory agencies to better detect, prevent and disrupt illicit activities within Australia and overseas
  • Just over $374 million will be spent over the next two years to give every Australian an electronic health record by default, with another $67.3 million to go towards the overhaul of the Medicare payments system. The Immigration department has been handed $95.4 million to improve its storage and processing of biometric data and introduce a new risk processing system for travellers.
  • Measures aimed at cutting regulation for fintech startups and expanding the ‘regulatory sandbox’.

 

Education

Education has been a key policy area in the build up to the budget, with the government announcing major changes on university and school funding over the past week. As such, there were no major surprises under the education banner on Tuesday night.

The Turnbull government has effectively poached Labor’s policy by announcing the Gonski 2.0 education package on needs based funding. However, developments are not so great for university students.

The major announcements included:

  • A $2.8 billion cut to Australian universities will increase the share of university costs borne by students by an additional 7.5 percent to be phased in over four years, while also lowering the salary threshold for university fee repayments to $42,000 from a current level of $55,874.
  • Federal money for schools will increase from $17.5 billion in 2017 to $30.6 billion by 2027 in an effort to give all students a ‘fair go’ by bringing each school to the same needs-based per-student level. The majority of Australian schools will see an increase in funds of 2.5 percent, with some experiencing greater increases.
  • 51 independent schools (both private and Catholic) will experience cuts or withdrawal of government funding. In response to a backlash from the Catholic education sector, Senator Birmingham has maintained that the cuts are all part of introducing true needs-based funding based on fairness.

 

Health

Australia’s health system was a primary focus for this year’s budget, with a $10 billion healthcare package announced. As part of this, the Medicare Levy will rise from 2% to 2.5% of taxable income (from July 1 2019) in order to fully fund the National Disability Insurance Scheme (NDIS) and guarantee Medicare.

The decision to raise the levy will ensure the NDIS is fully operational by 2020; seeing 46,000 disabled people better supported at a cost of $21 billion a year. Tax payers who pay the Medicare levy will be affected by the increase in tax rates whereas low income earners will continue to receive relief from the levy through the low-income thresholds for singles ($21,655), families ($36,541), seniors and pensioners ($34,244). The current Medicare Levy exemptions will remain in place.

The major announcements included:

  • A new Medicare Guarantee Fund to cover essential healthcare which will see $1 billion provided over four years from 2017-18 for the phased unfreezing of the Medicare rebate. Starting with bulk billing incentives for GPs in July 2017 and moving on to the lifting of the Medicare rebate for specialist consultations in 2018, specialist procedures in 2019 and diagnostic imaging in 2020
  • Patients with severe eating disorders will now benefit from an $80 million fund for those with severe mental illnesses and $350m will go to mental health services for veterans. There will also be greater investment in access to telehealth and telemedicine for psychology services.
  • A $5.5m vaccination campaign that will see Family Tax Benefit A payments reduced by $28 a fortnight from July for children who aren’t fully immunised.
  • Price cuts for taxpayer-subsidised medicines, which will save $1.8 billion over five years, and an extra $2.8 billion in funding for hospitals, including $730 million for Tasmania’s Mersey Hospital.
  • Reforms to the Pharmaceutical Benefits Scheme will be used to reinvest into drug subsidies and pharmacy initiatives.
  • The Medical Research Future Fund will get $65.9 million towards preventive health research, clinical trials and breakthrough research investments, and $5.8 million will be provided for research into childhood cancer.

 

Resources, Energy & Climate

In the biggest energy announcement in this year’s budget, the government outlined its plan to acquire a larger share or outright ownership of Snowy Hydro, as well as a commitment to keep the scheme in public hands, in what it is calling Snowy 2.0. Currently, Victoria and New South Wales own a combined 87% of the Scheme, and the Treasurer flagged that discussions with the NSW state government were already underway.

Announcements in this area were likely muted, with the wide-reaching Finkel Review into Australia’s energy future due in the coming weeks.

The major announcements included:

  • An announcement to set aside $90 million to secure access to gas resources for domestic use. Energy consumers and businesses will get a fairer deal, with more funding going to ACCC to investigate competition in retail electricity and gas markets. Additional funding will go towards improving gas market efficiency and transparency, and there will be increased investment in “new generation, transmission and storage capacity”.
  • Around $37 million will go to South Australia for new energy infrastructure and funding to prove up gas pipeline proposals to South Australia from Western Australia and the Northern Territory.
  • The establishment of an enquiry into why electricity prices are continuing to rise. The government will also be offering limited assistance to pensioners struggling to pay their bills.  A one-off energy assistance payment of $75 for single eligible recipients and $125 per couple was also announced.

Long weekend listening

Entertainment, General, Media

We’re switching off the laptops, putting the phones to silent and kicking back until Tuesday morning. For any trips, long or short, podcasts are essential. Here are Edelman Australia’s top picks to keep you entertained over Easter.

We’re switching off the laptops, putting the phones to silent and kicking back until Tuesday morning. For any trips, long or short, podcasts are essential. Here are Edelman Australia’s top picks to keep you entertained over Easter:

 

My Favorite Murder – @MyFavMurder @MFMPodcast @MyFavoriteMurder

Weekly comedy podcast hosted by two lifelong true crime fans and comedians, Karen Kilgariff and Georgia Hardstark. The girls bring their own flavour to each episode, using dark comedy and shock to share their unique perspective on well-known cases.

Bonus: It has applications to work! Click here for ‘5 things marketers can learn from My Favorite Murder podcast.’

 

Generation Why – @GenWhyPod @TheGenerationWhyPodcast @GenerationWhyPodcast  

The ultimate true crime podcast, where Aaron Habel and Justin Evans spend every episode delving into all the details and their theories surrounding an unsolved murder, mystery or true crime story.

 

My Dad Wrote a Porno – @MyDadWroteaPorno @MyDadWroteaPorno @MyDadWroteaPorno

Yes you read this right, but don’t judge until you listen to it. It follows some QI (that program with Stephen Fry) researchers where one of their Dads has literally written a naughty novel, entitled Belinda Blinked. Hilarity ensues and it is well worth it. 

 

The Bugle – @TheBugle @TheBugle @TheBugle

For a touch of British sarcasm and a run down of the biggest news, this is your go-to. This satirical podcast throws shade onto all of the world’s leaders in the most hilarious fashion. 

 

#AskJackD – @JackDelosa @delosa @Jackdelosa

Jack Delosa is an entrepreneur and the founder of The Entourage who aims to bring entrepreneurial learning into schools. He offers simple and tangible advice on how to grow your business, generate revenue or deal with business failures.

 

Ted Radio Hour – @TEDRadioHour @TEDRadioHour

Talks on all fascinating ideas, inventions and new ways to think and create. From understanding why people are always online, to scientific processes and achieving the next big breakthrough. The sessions are hosted by Guy Raz and new episodes are released weekly.  

 

ABC Radio National – All In The Mind @allinthemind @ABCRNAllInTheMind 

Want to know more about your brain and how it tweaks behaviour, this is the podcast for you. Most recently an episode called “Growing Up Digitally” documented how different generations mature with and without internet. Fascinating listening. 

 

A Neuroscientist Explains@bnglaser 

A podcast that only kicked off in 2017, A Neuroscientist Explains looks at a different news topic each week through the science of the mind. The sessions are shared on a weekly basis and hosted by Observer Mag columnist and neuroscientist Dr. Daniel Glaser. Highlights are ‘How music affects the brain’ and ‘How we perceive the truth’.

 

The 5AM Miracle – @JeffSandersTV @jeffsandersproductions

An action-focused weekly podcast hosted by Jeff Sanders that is dedicated to “dominating your day before breakfast”. Jeff talks about how to tackle goals and challenges with enthusiasm and encourages his listeners to adopt small daily habits that lead to long-term results. He often hosts experts who contribute to the podcast covering topics such as emotional health and happiness, productivity and time management.

The 5 things to know about the new AANA social influencer laws

General

So by now you’ve probably heard about the new Australian Association of National Advertisers (AANA) influencer laws, which is an amendment to a current law for celebrities and “influencers” on TV, radio and print but never on social media, until now.

So by now you’ve probably heard about the new Australian Association of National Advertisers (AANA) influencer laws, which is an amendment to a current law for celebrities and “influencers” on TV, radio and print but never on social media, until now.

 

This post is not an outline of how to use influencers, so if you haven’t read Paulie Linton’s blog post on “Why you should be ‘fashionably late on spending money on trends”, do yourself a favour and give it a read to brush up on influence vs influencers.

 

The amendment to the law has been put in place to combat those on social media who post false information about a product or brand, to the point where some influencers/bloggers accept payment to post about a product without having even tried the product, or even writing the endorsement themselves.

 

Below are 5 things from the AANA laws to know if you’re engaging an ‘influencer’ on social:

  1. An influencer isn’t determined by follower base

If you are engaging and transacting with anyone to convey a message on behalf of your business, they will need to disclose that they are doing so, or both parties will be liable to fines. Social influencers are no longer restricted to the Kim Kardashians of the world.

  1. Payment isn’t restricted to money

So, you have a business that sells candy bars, you reach out to a few influencers and send them free product asking them to post about how much they love the bar and use your hashtag. If you don’t classify this as payment, then you’re wrong. This is an exchange of reward and the ‘influencer’ must disclose that the post was paid for.

  1. You don’t have to put a # on it

Notice an increase in #ad on social channels? As I write this there are over 3.5 million tags on Instagram posts. So is this necessary? Short answer is no. If the copy makes it obvious that the influencer was paid, or is speaking on behalf of the brand and the post is not misleading to the applicable audience members, then you’re in the clear.

  1. This is a law, not a guideline

This point is rather self-explanatory, this amendment is not a guideline, it is the law, meaning if you’re in breach of the new rules then you will be eligible for a fine (up to $1.1million for brands) or stricter punishments.

  1. What if the Influencer goes rogue?

These new rules are not just for the influencer’s protection, but also for the brand’s. Some of you may recall the case of Essena O’Neil, a beauty/lifestyle influencer, who after agreeing to post certain content, ended up going back and changing all the copy on her posts to negatively talk about the brands who paid her to post. Luckily for Essena this was before the new laws, so she was let off the hook without prosecution.

If you have a signed contract with the influencer on scripted copy or even strong suggestions for copy, that they have agreed to, then they go rogue, they can be prosecuted under the new laws (and fined up to $220,000 for an individual). A contract is something that should always be sought after, even to outline best practices for both parties.

 

So even though there is a new law in place, there isn’t too much that needs to change for brands. The above list is best practice to ensure that your brand stays within the law when engaging and transacting with an influencer, no matter how big or small the activation may be.

 

For any additional information on the AANA law amendments they can be found HERE.

One man, a lot of BBQ and four trends from SXSW 2017

General

Now that the dust has settled, the delegates have returned home, and the smell of BBQ has been washed out of clothes – it’s time to reflect on some of the top trends to appear out of this year’s SXSW, the world’s largest conference for interactive and emerging technology, hosted in Austin, Texas.

Now that the dust has settled, the delegates have returned home, and the smell of BBQ has been washed out of clothes – it’s time to reflect on some of the top trends to appear out of this year’s SXSW, the world’s largest conference for interactive and emerging technology, hosted in Austin, Texas.

 

Once again, a packed program of over 800 official sessions and numerous unofficial sessions took place with speakers stretching from mountain climbers through to neuro-scientists by the way of rocket engineers.  Throw in trade stands peddling every possible new technology that comes to mind and you’ve got a jam-packed schedule.

 

Below represents just a very small number of the fascinating trends that really caught my attention over the week.

1. Autonomous Vehicles

There was no escaping autonomous vehicles this year at SXSW with flashy exhibitions from NIO, a new e-vehicle start-up to come out of China, and a fascinating discussion led by Ford CEO Bill Ford, who summised that whilst the technology was unquestionably just around the corner the challenges fundamentally lie within society.  In short, are we ready to manage the consequences of autonomising entire industries and the subsequent shift in employment needs? And are we employing the right people to make this happen?

2. VR as a communications tool

My colleague Jennifer Trou sums it up well in her recent Friday Five post: “VR and AR were seemingly on every corner and in every activation, but much of the conversation about them was still focused on the real-world applications. So while VR and AR will play a role in our future, many are still figuring out what that will be exactly.”

3. The future is bright. The future is Bots

Bots were an unescapable force this year, from Abbey, the official SXSW bot who helped you find your way to the right session and helped many a delegate find out what they’d missed, all the way through to Facebook and messenger bots transforming how consumer engage with brands through social media.  One way or another, as AI becomes more complex and sensitive, bots will inevitably take over many roles currently held by real people.  Whether they can manage the Australian sense of humor is yet to be seen…

4. Influencer Marketing – the new frontier

A huge conference track this year, a number of sessions dedicated their entire time to influencers. What I found interesting was the number of brands doing it right and the number that are still swinging and missing, with a heavy debate about the difference between Influencer Marketing and Influencer Engagement.  For a more in-depth analysis of the state of influence in Australia, I suggest you take a look at Pauline Linton’s great piece on why you should be ‘fashionably late on spending money on trends’.

 

Needless to say this is just four trends that immediately leapt out this year. To hear more on these topics, as well as other interesting discussions including neuroscience over-taking the traditional focus groups, the rise of National Geographic as the most exciting brand in the world and iMessenger as green space for brands, keep an eye out for an invitation to the upcoming Edelman Soundbite session that will go into much more detail.

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