Jim Chalmers’ first budget stands as firmly as possible on the quicksand of difficult and unpredictable international and local conditions.
Chalmers promised budget would be “hardworking” not “flashy” and he kept his word. Almost all of this has been published in advance by the government, including measures and figures.
This can be seen as an interim budget, with the new government taking stock and taking some early action.
At one level, the budget does simple things.
He attacks the relatively weak targets left behind by the coalition, which gave out many gifts when it got desperate before the election. And it delivers on a number of promises Labor campaigned on.
But making any budget in such uncertain times involves tricky trade-offs and careful judgment. So the opposition’s “line” before Tuesday – that it’s just a mid-year budget update – vastly understates the task.
The government was sensibly cautious. Cost containment was vital. Despite the hard times and the pressure to help people, any spending would be inflationary and at odds with the Reserve Bank’s efforts to cool the economy.
Interest rates are due to rise again before Christmas in any case – so the worst would be a fiscal policy that forces the bank to push them further.
The emphasis on delivering on election commitments in this first budget is important because it builds voter confidence – and thus political capital – early in the government’s term.
On that front, Prime Minister Anthony Albanese has been wise to reject Chalmers’ inclination to redo the tax cuts in Phase 3. That would have turned the Budget’s story from promises kept to promises broken, potentially damaging Labour’s deal with the electorate.
“Restraint is the name of the game in this budget,” Chalmers said at his media briefing. While Tuesday’s efforts pass the “restraint” test so far, it’s clear that there will be tough decisions ahead.
The figures show that the deficit increases in the second, third and fourth year of the forecast estimates. Costs in areas such as the National Disability Insurance Scheme (costing almost $52 billion in 2025-26 and potentially rising to well over $100 billion by 2032-33) need to be addressed and this will be much more difficult from a political point of view, than the abolition of the coalition dam or several parking lots.
Economists will like the budget, but ordinary voters?
Leaving aside those with cuts in their pockets, they are unlikely to be hostile. But they don’t see anything special about it either.
And they will be spooked by dire forecasts for electricity and gas prices and how remote the prospect of real wage growth is. But more broadly, they will already know the story of inflation from their everyday lives.
Promises of cheaper childcare, lower drug costs and more affordable housing are said to be part of “responsible cost-of-living assistance”.
But this is a misnomer. Only a minority of people will benefit from changes in child care at any given time. Housing will remain unaffordable for many.
As a cost-of-living relief, the budget figures pale in comparison to the massive future energy costs and interest rate hikes of the past few months and beyond.
This does not mean that the budget should have provided more direct cost of living assistance. It should only be noted that the government pays a lot of attention to the labeling of things.
Chalmers stresses that this is the first of a set of budgets that will be preceded by “conversations”. You can bet the later ones will make for stronger headlines.
Future cuts will be more controversial. And at some stage the government will deal with the tax issue, but when and in what form is unknown. “I think taxes should be part of the conversation going forward,” Chalmers told the media.
It’s been a tough few months for Chalmers. But in reality he was in the easy stages of what would be a marathon.
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