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More free GP visits, a $20-a-week boost to JobSeeker, power bill discounts – the government’s second budget had a bit for those doing it toughest while also working to reduce inflation, according to the treasurer.
But let’s not just take Jim Chalmers’ word on it: economists spent hours poring over the budget papers on Tuesday. Here’s how they scored it.
Credit: Marija Ercegovac
Cost of living help
Chief executive of the Grattan Institute Danielle Wood is broadly happy with the budget help dished out on Tuesday night.
“They’ve managed to walk that short-term line between giving some relief, particularly to the most disadvantaged households, and not substantially adding to inflationary pressures. So that’s the tick,” she said.
EY Oceania chief economist Cherelle Murphy said the additional support for vulnerable households was much needed, but the government should have covered the cost of all those measures from savings found elsewhere in the budget. “It’s very warranted and very necessary at the moment, but a really tough fiscal manager would have offset that,” she said.
That brings us to inflation, and Murphy doesn’t think the budget quite hit the mark here, because the government did not save every bit of additional revenue or pare back spending.
She noted a lot of the new spending – $12 billion of it – hits in the next 14 months, when inflation will still be high.
“I think they are still adding stimulus into an economy which is running at 7 per cent inflation,” she said.
“I wouldn’t say in itself that triggers a rate hike by any means, but it certainly doesn’t help.”
Wood said the relief, particularly up to $500 power bill discounts for concession card-holders, would reduce inflation in the short term and modestly add to inflationary pressure over time – relatively responsible, she said, given the constraints.
Head of Deloitte Access Economics Pradeep Philip said the much-needed assistance for vulnerable households would overall be slightly inflationary.
“From a macro perspective, it pumps more disposable income into the economy, which is not what is conducive to lowering inflation and lowering interest rates,” he said.
“That said, some of those expenditures are absolutely necessary for good economic and social reasons, like increasing JobSeeker, dealing with single parent payments, housing and rent assistance.”
The government had a bit of budget help thanks to $130 billion in extra revenue, Philip said.
He said the government had used that luck and exercised a decent amount of restraint by finding other savings (about $18 billion over the coming four years) and keeping spending growth around 0.6 per cent over the coming four years.
“The fact that with the rivers of gold, 82 per cent of this is banked to the bottom line, I think that is a remarkable achievement. The temptation to just spend would be enormous,” he said.
Barrenjoey senior economist Johnathan McMenamin also gave the budget a tick for putting most of the additional revenue towards debt. “That is reducing the interest costs that the budget has to face over the medium term quite substantially and reducing the structural deficit in the budget quite a lot,” he said.
Wood said some of the Medicare changes, including expanding urgent care clinics and changes to pharmacy dispensing rules, were important reforms to primary healthcare.
“That’s a genuine, genuine reform that the government is delivering,” she said.
But overall, she said the budget needed to do more.
“I think it was responsible, but probably not brave,” Wood said. “The bigger question mark is, you know, that longer-term vision, have they … substantially addressed those structural budget concerns? And I think the answer to that is no.”
Philip said that, at a broader level, there were still major structural problems with the budget that required tough decisions.
“Right now, the end game is being propped up through some sustainable savings in the long term, but mainly through revenue growth and the economy growing faster,” he said.
“But the things that drive that economy to make it go faster, ie investment and productivity, they’re the things that are missing.”
McMenamin said the government got a fail on budget reform.
“To be fair, it was never marketed as a budget that was going to deliver big reform,” he said.
Given the strength of commodity prices and employment, McMenamin said the budget surplus for 2022-23 would be much higher if underlying structural problems were fixed.
“The fact that we’ve only been able to achieve a $4 billion surplus highlights just how out of balance the budget really is right now,” he said.
Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.
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