Further to this, it allows the Morrison Government to frame the next election as a choice between a high taxing, high spending Labor government and a lower-taxing, smaller Liberal government.

With many macroeconomic indicators pointing to an Australia economy that is gradually slowing. Stuck in an economic sludge of high indebtedness, low wage growth and low productivity growth, a mildly stimulatory budget is welcome. The government is handing back cash through a combination of a one-off direct cash payment of $285 million and future income tax cuts/offsets with $302 billion over the next decade (mostly back-ended).

The direct cash payment will go to pension recipients under the guise of an Energy Assistance Payment, which will be legislated this week and hit bank accounts in July, providing an immediate sugar-hit to consumer spending. Taxpayers on incomes up to $125,000 will benefit from a doubling in the low and middle-income tax offset (LMITO) to up to $1,080 once they lodge their tax return for the current financial year (FY19).

In terms of fiscal balance, the Coalition can lay claim to returning the budget to surplus in the next financial year (FY20). Despite having three different treasurers since 2013, the government deserves some credit for reducing spending growth to 3.5% p.a., down from 6.9% p.a. under the previous government. However, the heavy lifting in budget repair has come from improved growth in government receipts, which have grown at 6.1% p.a. compared to just 3.4% p.a. previously. The extent to which you credit the government for this will likely depend on your political views.

The increase in receipts has come from a combination of improved employment conditions, with unemployment falling from 6.4% in 2014 to 4.9% at the end of 2018, and a sharp rise in commodity prices (iron ore/metallurgical coal) since mid-2017. This second factor is the primary driver behind the uplift in receipts (black line) and the closing of the gap between spending and receipts shown in the graphic below.

The budget promises an increase in infrastructure investment to $100 billion over the forward estimates, up from $75 billion in the previous budget. The bulk of the increase in spending has been earmarked for politically appealing projects, such as tackling inner-city congestion and the perennially talked-about (but never delivered) high-speed rail.

Given Australia’s population forecasts and the inadequate existing infrastructure, a greater emphasis on this area is needed to drive productivity gains and ultimately real wage growth. However, we are sceptical that the projects highlighted represent the best productivity returns and see little likelihood of many progressing to implementation.

As a final point, the opposition's budget response to be delivered on Thursday is shaping as an ideological debate between the benefits of big, high taxing, high spending government and a smaller low taxing alternative. There are many benefits to providing a higher social safety net and vice versa for smaller government; the important step is to have this discussion in the public forum. Given the likelihood of a Shorten Government, we will be paying close attention to Labor’s budget reply and providing a follow-up commentary on any significant impacts not already announced.

As partners in your investment journey, it is important to us that we take the time to share key aspects of our approach and philosophy.

This article is part of our 2019 Budget commentary and one such starting point in our highly considered process that will ultimately manage asset and wealth protection. For further reading of our 2019 Budget series, please click one of the links below:

• Individuals & Families

• Small & Medium Business

For more information on our approach to wealth and asset protection, please contact us on +613 9655 5000.