The government will pack tax cuts and other goodies into next month’s budget to get it through the next election, BDO predicts

Morrison will be looking to hand out sweeteners ahead of a potential election. (David Gray, Getty Images)
  • The Morrison government is expected to hand out plenty of “sweeteners” in the coming federal budget on May 11.
  • Accounting firm BDO predicts measures to include tax cuts, super to be paid on top of parental leave, and no delay to the super guarantee.
  • “The government will be looking to spend money on the policies that will help them win at the polls in 2022,” BDO tax partner Mark Molesworth said.
  • Visit Business Insider Australia’s homepage for more stories.

A Federal Budget is just three weeks away and it could be the Morrison government’s last opportunity to lay down a major policy platform ahead of the next election.

Global accounting firm BDO’s Australian arm has begun speculating about exactly what the federal government could hand out, suggesting it will be likely to include a number of sweeteners for voters, should it go to the polls before the next one.

“This year’s budget will be a ‘Push Me Pull You’ scenario. The need for budget repair will push the Government in one direction, but the whiff of an upcoming election will pull them in the other,” BDO tax partner Mark Molesworth said.

“The government will be looking to spend money on the policies that will help them win at the polls in 2022.”

The Morrison government has already hinted at potential austerity measures aimed at slashing the $1 trillion budget deficit accumulated during the pandemic.

While fiscal responsibility has become a mainstay of the Coalition election pitch for years, it’s unlikely to risk any of its political capital on drastic cuts. The Morrison government is in a particularly precarious position having lost its outright majority earlier this year with the defection of Craig Kelly to the cross bench.

With that in mind, Molesworth and BDO are expecting the Prime Minister to focus on the Australian hip pocket.

“There are likely to be tax sweeteners for voters, in particular personal tax rate cuts for middle income earners, with more than 10 million Aussies earning under $120,000 due to face a tax hike from next financial year,” he said.

Another major priority will be winning back female voters, after a disastrous few months. The historical allegations against the former Attorney-General Christian Porter the misbehaviour of political staffers, the alleged rape of Brittany Higgins, the Christine Holgate dismissal, and the government response to it all has hurt it in the polls.

Looking to bridge the widening divide between Canberra and Australian women, BDO says the government will zero in on “female friendly proposals”. It speculates superannuation will be paid on top of paternity leave to ease the wage gap and reduce the financial burden felt by mothers.

When it comes to superannuation, it’s not the only change of tact, as the Coalition looks like it will back down on changed the scheduled rise in the super guarantee.

“The chances of stopping the superannuation guarantee increase to 10% on 1 July is very low as the deadline is now too close,” Molesworth said. “Instead, they may focus on reviewing the timetable for future increases and perhaps look at trading off other changes, such as the base on which contributions are made.”

Last week the Morrison government began talk of Australia’s 2050 path to net zero emissions. One potential winner out of that discussion could be reforms to the luxury car tax, which helps to price out expensive but more environmentally friendly vehicles like Teslas.

BDO also suggests the government will agree to implement the recommendations from the aged care and disability royal commissions.

Rather than cut spending, the government could instead try growing the economy and thus its tax base via friendly business policies. As other countries raise their company tax rate, Australia could lure more businesses here via research and development incentives.

All of this of course is guesswork as to what the government might do. Technically, it could call the election after the 2022 budget, giving it another shot at righting the ship.

In January it had looked like the government would look to capitalise on its solid pandemic performance by calling an election later this year. A botched vaccine rollout and a number of scandals later, the same speculation looked premature.

The polls ultimately will force its hand here, one way or another.