Treasurer Jim Chalmers is set to hand down his second budget with a back-to-back surplus of $9.3 billion for the first time in almost two decades.
He has promised to unveil nationwide cost of living measures in Tuesday’s budget but has insisted it will not fuel inflation or further interest rate rises.
The budget surplus is the first since the global financial crisis hit but won’t last long as the surplus will disappear from 2024-25.
The federal government’s finances will plunge into the red over the next four years due to “unavoidable spending” on the likes of defence, the National Disability Insurance Scheme, interest payments on debt, aged care and health.
But back to this year’s budget – here is what is happening and what’s to come.
Barefoot Investor ditches Budget ‘tradition’
Scott Pape, better known as the Barefoot Investor, has revealed that, for the first time in over 20 years, he won’t be going into the Budget lockup in Canberra today.
Explaining the break from “tradition” in a recent newsletter, the finance guru branded the Budget as a “poor man’s prime-time political theatre”.
“The Government’s spin doctors spend months in focus groups conjuring up a catchy name for their signature splurge – which they hope will get them re-elected,” he said.
“Then they get turfed out, and the next mob dismantles it.
“Plus, all the rosy economic forecasts they make in the Budget can’t hide the fact that many people feel like they’re living in a recession right now.”
Instead of looking to the government for help in these difficult economic times, Mr Pape suggested Australians focus on what they “can directly control”.
He encouraged people to start a new “Budget Tradition” by pulling out an old copy of his book and writing down which Barefoot Step they are on and picking one thing they can do in 30 minutes to help get them to the next step.
“It could be sacking your scheissenhausen super fund, dominoing your debts, getting a cheaper deal on your insurance (they can do better, trust me) or, most importantly, rebalancing your bucket percentages after all the rate rises and rental increases,” he said.
Mr Pape has branded it the “Barefoot anti-Budget”.
More needs to be done for women, Aboriginal and Torres Strait Islander people
One advocacy organisation is calling for concrete steps to improve the lives of Aboriginal and Torres Strait Islander people, describing it as a necessity to reassure the nation that it cares.
The Coalition of Peaks acting Lead Convenor Catherine Liddle said it had been a tough year for Aboriginal and Torres Strait Islander people.
“Everyone is hurting at the moment, communities across the nation are doing it tough, and what we need from this budget is some good news – a sign the Prime Minister is following through on the promises to invest in our communities. That was the promise he made to us,” she said.
“This year, on the anniversary of the Apology to the Stolen Generation, the Prime Minister stood up in parliament and said he would listen to and partner with us, but what Aboriginal and Torres Strait Islander people are seeing right now is business as usual.”
In February, a major Productivity Commission review found Federal, State and Territory Governments were failing in their commitments under the National Agreement on Closing the Gap and the Coalition of Peaks has called for more funding.
Meanwhile, a number of organisations want to see more done for parents. Thrive by Five, The Parenthood and SNAICC want to see a long overdue wage increase for Australia’s early childhood educators, which is likely to appear in the budget.
The groups also want to see abolished the “punitive” childcare subsidy Activity Test, which prevents over 126,000 children from accessing early learning and disproportionately impacts First Nations children.
The Parenthood CEO Georgie Dent said that Australia is in the midst of a national crisis when it comes to accessing early childhood education and care – and this impacts children, parents, educators, employers and the economy.
“The Activity Test is proven to most negatively impact single mothers, low-income families and First Nations families. It was meant to incentivise work, but in reality, parents who don’t have a shift or a job cannot afford the out-of-pocket cost for early education and care because they don’t meet the requirements of the test,” she said.
“At the same time, if they don’t have suitable care lined up, they cannot take a shift or find work. In light of the current epidemic of violence against women, the last thing mothers need are barriers to accessing care for their children.”
National women’s organisation March4Justice has called for a national domestic violence database for all perpetrators that is to all prospective employers and potential new partners, among other things.
“This budget is an opportunity for the Australian government to show us what a woman’s life is worth,’ said March4Justice chair Janine Henry.
“For too long, the government has ignored the opportunity for long-term, systemic change by not investing in specialist services or centring the voices of survivors when it comes to reform.”
Prime Minister flags immigration changes
A record number of immigrants entered Australia in the year to September 2023 with a surge of 548,000 international students and temporary workers.
The influx has been blamed on exacerbating the housing crisis and Prime Minister Prime Anthony Anthony revealed Labor will cut immigration levels below 300,000.
“We want to bring it down to around about half of where it peaked. You’ll see a range of measures in tonight’s budget aimed at doing that, including a clamp down on integrity issues when it comes to higher education – that’s really important,” he told radio station 3AW.
‘Grinding poverty’: Hefty criticism of budget already
Both the Greens and the Coalition have hit out at the budget and its surplus but for very different reasons.
Greens economics spokesman Nick McKim has slammed the $9.3 billion surplus and has accused the government of not doing enough to actually doing enough to look after the people impacted by inflation.
“I mean, what the surplus shows is that they’re prioritising their own political benefit over investing in the kind of programs that would provide genuine help to people who are really doing it tough at the moment,” he told ABC radio.
“So what you’re going to see in the budget tonight is that having talked up an absolute storm on things like climate change and on things like cost of living, Labor is simply not prepared to take the action necessary to respond to those challenges that the urgency and the scale that is required.”
Mr McKim said the budget is about “political choices” and Labor is choosing not to introduce policies that would make a difference.
He called for significant action on cost of living pressures such as “stopping the supermarket’s price gouging”, dental and mental health care via Medicare and seriously wiping out student dent.
“For example, you could end the massive tax breaks for property investors who own multiple investment properties then put in place a rent freeze and a rent cap, for example,” he explained.
“You could tax billionaires and CEOs on the basis of their wealth and you could use that revenue to raise income support, which would lift a large number of Australians out of the grinding poverty that they experience every day.”
The Antipoverty Centre has also said that a surplus without meaningful support for people in poverty would not make a responsible budget.
Two Labor budgets described as ‘flops’
Shadow treasurer Angus Taylor said more needs to be done on cost of living and has labelled both budgets as “flops”.
“Both have completely failed to beat, to tame, the cost of living crisis that we continue to see in this country. And only weeks ago, we saw new data on inflation that shows it’s going up, not down,” he said.
“Meanwhile, this Treasurer has said everyone is overreacting. Australians aren’t overreacting with the cost of living crisis they’re facing right now. They are seeing the real pain in their household budgets, they’ve seen a huge reduction in the purchasing power of their pay packets.
“And they want to see a government that has a plan to beat inflation sustainably. The test for this budget, the first and most important test, is that it has a pathway to tame inflation, having failed twice before.”
But he also called for spending restraint to ensure inflation is tamed.
“I think what Australians want to see in this budget and from this government is the taming of the homegrown inflation that’s been raging so much across this country. That’s the overwhelming issue we see as we get out and about,” he told ABC radio.
He added the key was to ensure the economy was growing faster than spending.
“So far, we haven’t seen that from Labor budgets $200 billion of additional spending in their past budgets, that’s $20,000 for an average Australian household, and I bet there’s not many Australian families out there who are feeling the benefit from that,” he said.
Fears over interest rate rises
The Treasurer told reporters in Canberra that the resilience of the labour market had driven the budget surplus but has hit back at suggestions the budget will stoke inflation.
“The budget will put downward pressure on inflation, not upward pressure on inflation,” he said.
“We’ll do that by showing spending restraint, by banking almost of all the upward revisions in revenue this year.
“And by making sure that we design our cost of living help so that it’s part of the solution to this problem. Our primary focus in this budget is cost of living and fighting inflation.”
When asked if rates will remain higher for longer, he said the budget is not the only influence and it was an independent decision for the Reserve Bank of Australia (RBA),
However, Treasury and the RBA are at odds on when inflation will return to its target rate.
Treasury anticipates a return to the RBA’s inflation band of 3 per cent by the end of the year and not 2025 as the Reserve Bank has predicted.
For the 2024-25 year, Treasury has forecast inflation to sit at 2.75 per cent – lower than the RBA’s forecast of 3.1 per cent.
Huge number of Aussies stressed
Hordes of Australians battling to keep a roof over their heads are set to miss out on immediate relief, with advocacy groups saying too little is being done to help those being hit hard by the ongoing rental crisis.
Asking rents have risen by more than 75 per cent since the start of the pandemic, according to SQM Research meaning even Australians with good incomes are under mounting pressure, Everybody’s Home spokeswoman Maiy Azize said.
The InfoChoice Rent Crisis Survey, released in January, found 70 per cent of respondents who lease their home are in a state of housing stress.
However, Tuesday’s budget isn’t likely to contain any new measures to address the housing crisis.
It comes as new Finder research showed 41 per cent of Australians said their rent or mortgage was one of their most stressful expenses in April.
Almost 40 per cent also listed their groceries as one of the biggest stress factors, while one in four Aussies felt financial pressure due to their electricity bill.
“Aussie households are under significant pressure right now, and they have been for the last 18 months to two years,” said Finder’s money expert Sarah Megginson.
“The cost of almost everything, from housing and groceries to energy bills and insurance, has risen sharply. While the federal budget won’t be a magic bullet to alleviate cost of living concerns, any relief to household budgets will be welcome news.”
Mr Chalmers told the ABC’s AM program on Tuesday morning that the budget will put those doing it tough “front and centre”.
“It’s a responsible budget, which eases cost-of-living pressures and fights inflation and invests in a future made in Australia, and it does all of those things,” he said.
The budget would also “ensure that people earn more and keep more of what they earn”, he added.
Budget wins we know so far
Aussies are begging for cost of living relief as they have been smashed by skyrocketing interest rates, soaring grocery costs, higher fuel prices and runaway rental increases.
We already know a big part of the government’s cost of living relief is the overhauled stage 3 tax cuts.
Set to take effect from July 1, these tax cuts will bolster the take-home pay of every taxpayer – rather than middle and high income earners who benefited under Morrison-era iteration of the tax package.
The door has also been left open for additional power bill relief and a boost to rental assistance, but the government appears to have quashed any hopes for a substantial increase for those on Jobseeker.
University graduates welcomed the news that $3 billion in HECS-HELP student debt would be wiped for three million Aussies.
The government has also unveiled a $11.3 billion package aimed at boosting the supply of social and affordable homes.
It will also spend an additional $90 million to boost the number of skilled workers in the construction and housing sector.
The biggest budget centrepiece so far is trying to reshape the economy with its Future Made in Australia industry package, which will include tax concessions, direct subsidies and grants, aimed at strengthening the economy as it transitions to a clean-energy future.
It includes $3.4 billion in unspecified loans, grants and equity stakes towards the manufacture of solar panels in Australia, the luring to Brisbane of Silicon Valley start-up PsiQuantum to support their bid to build the world’s first usable quantum supercomputer., and seed money for three critical minerals projects.
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It has also flagged a multibillion-dollar commitment to increase aged care and child care wages, over $3 billion in new defence spending and $8.5 billion in new health investment.
The Albanese government has also announced a $49.1 million investment into tackling endometriosis, pledged almost $1 billion to combat violence against women and will begin paying superannuation on taxpayer-funded paid parental leave from July 1, 2025.
There was also an announcement to spend $161.3 million on creating a national firearms register.
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2024-05-14 02:57:40Z
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