The budget could see industry regulators such as the Australian Securities and Investments Commission (ASIC) receive extra funding.
Treasurer Scott Morrison is also expected to give homeowners a slight reprieve with income tax cuts.
Morrison has announced that he will be looking to give those who earn less than $87,000 a year a cut, which could amount to between $5 and $10 a week extra.
Speaking ahead of the budget, AMP Capital’s chief economist Dr Shane Oliver suggested bodies like ASIC could receive extra funding after the public hearings of the Royal Commission.
He said, “You could argue that a few responses that ASIC had given showed that they may not have done things because their budget was stretched, like prosecuting certain cases and so on regarding the financial system. You could argue the royal commission might have exposed issues of funding at ASIC.
“I don’t know that it will require a lot of money in the great scheme of things. With tax cuts ultimately could end up costing six to eight billion dollars a year, whereas in the case of the regulatory bodies you’re talking about millions of dollars not billions of dollars.”
In an interview on Today, Morrison said he was providing relief for workers who had not seen a decent pay rise in “a long time”.
Oliver said this was an “appropriate response”, given the slow wage growth. He added, “The household sector does need a bit of help at the moment, because we’ve had slow wages growth. So from an economic point of view you could argue well, low interest rates have done about as much as they can do.
“It’s hard to see people taking on more debt, although low interest rates do help existing homeowners. In the absence of an immediate pickup in wages, which the government can’t really control anyway, providing tax cuts is an appropriate response.
“The budget in terms of its direct impact on lending markets I suspect will be fairly modest. A lot of the debate after the budget will be to what degree tax cuts will boost consumer spending which may in turn have implications for the reserve bank. If the tax cuts are immediate and significant, then that could mean more pressure on the reserve bank to raise interest rates.
“I suspect that tax cuts will be phased in gradually. There’s talk of a $5 tax cut starting in July for low to middle income earners. That’ll result in the usual comparisons between the sandwich and the milkshake.
“In that sense there might be a boost to consumer spending or household income, but it may be a relatively short one in the small term and then it would come down to how long the tax cut stays in. I suspect it looks like the government is working on a phase program, where you get an initial cut in taxes, the low to middle income starting in July. But it’s a small one, only $5 for someone on a medium income. Building to then a bigger tax cut from July next year.”
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