10 Things You Need To Know This Morning In Australia

Joe Hockey in the Budget lockup last night in Canberra. Photo: Getty

Good morning, and welcome to Wednesday. Today we’re focused on the Australian federal budget, and here’s what you need to know:

It’s brutal. Australia’s federal budget has about $80 billion in cuts over the next decade for schools and hospital funding as part of a savage menu of cuts to government spending which the Coalition says will position the country for growth into the future. The deficit was actually a bit worse than thought: almost $50 billion this year, but falling to $29.8 billion next year and just $2.8 billion in 2017-18. Growth is expected at 2.5% next year and unemployment is expected to rise from the current 5.8% to 6.25% – a more dour assessment than expected by most economists and certainly something that didn’t trouble the market, with the dollar entirely steady on the news. There’s a summary of the main points here.

Tough love – without the love. The welfare cuts are far-reaching. Newstart unemployment payments for people under 30 don’t kick in for six months. Pensions will now be indexed to inflation, rather than wages. The threshold for receiving family tax benefit part B is cut to $100,000. Elsewhere, the increase in the fuel excise hits every motorist. There’s also a deficit levy as expected – people earning over $180,000 will pay an extra 2c in the dollar for the next three years. The axe fell everywhere: here’s a great list that shows the breadth of some of the cuts. Scott Haslem of UBS notes the spending cuts are more severe those envisioned by the Commission of Audit.

Startup support. The government abolished eight industry support funds including Commercialisation Australia and the Innovation Investment Fund, both important for co-investment in the startup sector. What’s replacing them is a $484 million Entrepreneurs’ Infrastructure Programme, included in the budget papers but extremely light on detail. It has too-hard basket written all over it. A generous way of looking at it: it’s a startup itself – starting with a broad idea, and working out the details from there. No?

Roads, research, and a business tax cut. Among the new spending, there’s $50 billion in infrastructure spending and the creation of a medical research future fund which will eventually be the world’s largest, at $20 billion. As promised before the election, there’s a 1.5% cut to the company tax rate.

Hockey’s dance. In an agonising moment for the Treasurer, he was asked by Laurie Oakes why he was dancing in his office shortly to “Best Day of My Life” just before walking into the parliamentary chamber to announce billions of dollars in cuts to schools and hospitals. It was unfair: Hockey had been spending a moment with his son Xavier for the first time in three weeks.

MH370 search cost. Finally, there’s a figure on the cost of the search for the missing Malaysian Airlines jet that gripped the world in March and April. The budget contains just under $90 million in funding over the next two years to pay for it.

Beats the street. Apple is in talks to buy headphone maker and music streaming platform Beats for $US3.2 billion. The weird thing is Beats, which was founded by rapper Dr Dre, is not a very good streaming music service, although it is a good category, accounting for more than 20% of music industry revenue in the US last year, up from 15%.

Stocks hit record highs. The S&P 500 topped 1,900 for the first time ever in the US. Both it and the Dow closed at a new all-time highs. Markets were fairly flat at the close, with the S&P up 0.04% the Dow up 0.12% and the NASDAQ down 0.33%. Asia was mixed yesterday, with the ASX up 0.9% and the Nikkei up 1.95%, but weaker-than-expected data in China, including retail sales, meant Shanghai didn’t join the rally. It’s a quiet day for data in the region ahead, with nothing in Australia and only machine tool orders in Japan.

MERS Watch. The disease that’s spreading through the Middle East has gained a foothold in the US. Two healthcare workers who treated the first suspected case of Middle East Respiratory Virus in the US last week now have started showing symptoms. The SARS-like virus claims one of three patients who contract it.

Christopher Columbus’ ship found. It’s been sitting on the bottom of the ocean somewhere off Haiti for 500 years. Now researchers claim to have found the wreckage of the Santa Maria – Christopher Columbus’s flagship. Columbus abandoned his ship in the Bahamas en route to North America, and confirming its location would be one of the most important underwater archaeological discoveries ever.

Have a solid day. I’m on Twitter: @colgo.

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