Jim Chalmers says he is in the “home stretch” of putting together his first major budget since Labor won the election. But don’t expect blue skies. The headwinds that were threatening to land in October are buffeting the Australian economy.
Inflation may have peaked but it’s unlikely to drop any time soon. Housing is in crisis, wages have gone backwards, more people are sliding towards poverty and those living on welfare are out of options. There is also the mounting cost of servicing the nation’s debt.
Australia’s economy may be better placed to handle the global uncertainty fuelling much of the inflation (the banking sector is largely secure because of regulation, the labour market is tight and the housing market has held or in some cases continued to increase) but outside of the aggregate, people need help.
What’s the likelihood of that help coming?
“I think this budget in particular is going to need to strike some pretty fine balances between, for example, providing a bit of assistance to people to get them through a tough time without adding to inflation; between investing in the kind of drivers of long-term growth in our economy while we still deal with these near-term challenges,” Chalmers said last week.
Let’s take a look at how that “fine balance’” will influence the budget wishlist.
Stage-three tax cuts
It seems almost every major and not-so-major group has called for these to be scrapped or delayed. The Australia Institute has been particularly focused on campaigning for the final stage of the Morrison government tax reform plan to be axed.
But despite the predicted $250bn in lost tax revenue over the last decade, don’t expect any action either way on stage three. The government’s position on the policy “hasn’t changed” and, given it is not legislated to begin until July next year, consider this one parked. Expect any further tax reform, beyond the modest superannuation changes already announced, to be floated outside of the budget process.
Petroleum resource rent tax reform
The public appetite for an overhaul of the PRRT, given the soaring profits gas exporters are making, is at a high – and Chalmers has all but confirmed this will be one revenue reform the government is prepared to make. Whether that will take the form of a “windfall tax” remains to be answered.
The Treasury is “working through options”, Chalmers says, which means an increase to the PRRT is a certainty, although answers to how it will work will have to wait until closer to the May budget.
National disability insurance scheme
How to fund the growing pressures on the NDIS (as well as aged care and health) is one of the government’s biggest talking points. But that doesn’t help those fighting to have their needs met or have certainty over their plan funding.
The NDIS minister, Bill Shorten, gave some hints in that space last week. The states are going to be expected to step up – not just with funding but with “better supports for people whose disabilities are not so severe they require to be on the NDIS”.
“The challenge is if all we have is an NDIS, then every solution will send people to the NDIS,” Shorten told ABC radio.
“Whereas if we’ve got more support in the community for mental health, if the school system works with kids with disabilities more consistently, if hospitals and the health system are more attuned to helping people with disability, then we won’t see, I think, the NDIS be the only lifeboat in the ocean.”
Welfare
Hopes are high that the government may raise the jobseeker rate, along with other social security benefits but there are no guarantees. The economic inclusion advisory committee set up as part of negotiations with the independent senator David Pocock has advised the government on what should be done on welfare payments, but the government has made no commitments.
Inflation and the affordable housing crisis has made an impossible situation even worse for people trying to survive on Australia’s social security payments, but the most the treasurer has said is that the government “can’t do everything it would like to do at once”.
“There are a lot of pressures on the budget. We will do what we can to make life a bit easier for people and we will go through the report that we’ve been provided on jobseeker and other issues with that in mind,” Chalmers said earlier this month.
Single parents
The women’s economic equality taskforce wants the government to axe the policy that moves single parents off the parenting payment and on to jobseeker when their youngest child turns eight. The Gillard government moved single parents on to the less generous unemployment benefit and parenting advocates say it’s adding to the burden of single parents “who already have a full-time job”. The minister for finance and women, Katy Gallagher, has said this is something the government is considering.
The women’s economic equality taskforce has also called for the axing of ParentsNext and starting again, claiming the Coalition program is too onerous. This is also something Gallagher has appeared open to.
Paid parental leave on superannuation
Paying superannuation on paid parental leave was on the table as recently as last month, with the Greens, the ACTU and the crossbench in support. It’s another move aimed at closing one of the gender pay gaps and Gallagher has been in support. Anthony Albanese, however, has hosed down expectations.
Cost of living
It is the No 1 issue on everyone’s minds at the moment, including the government’s. But don’t get your hopes up. Chalmers has repeatedly said the government does not want to do anything that could add to inflationary pressures.
With the treasurer having already ruled out a continuation of the low- and middle-income tax offset that was set to expire by the Morrison government, because of those inflationary pressures, there are unlikely to be any cash handouts to help with the cost of living for individuals.
But the details of the $1.5bn in promised energy price relief will be released as part of the budget, with the east coast states having worked through how to deliver it without providing cash handouts.
