As Treasurer Jim Chalmers prepares to dampen expectations of next week’s budget, a new forecast shows he will have to do so while swimming in revenue.
Chris Richardson, an independent economist and veteran budget watcher, has forecast a whopping $90 billion increase to the budget bottom line over the coming four years.
“We happen to be earning more from the world and at a stunning rate that hasn’t been seen in living memory,” he said.
It’s a temporary windfall, but it compares to the cost over the same period of the options to alleviate poverty being contested in the cabinet’s expenditure committee – a $160-a-fortnight raise ($15 billion) or an $80-a-fortnight rise ($5.4 billion).
Mr Richardson argues that the Treasury has been more than conservative and built a “hollow log”, or financial cushioning, into the budget by not accounting for increases in the price of goods Australia exports, which have run sky high since Ukraine was invaded.
These benefits might just be temporary, but the cash injection is as large a contribution to government coffers as the massive COVID-19 stimulus program JobKeeper was to the nation during the pandemic.
Rising inflation is also helping to ease the nation’s net debt levels, which must customarily be shoehorned into pre-budget interviews this week at every opportunity, but which are almost at parity with pre-pandemic levels at $538 billion.
The budget’s underlying cash balance is in the black, or was in March, according to the latest available Finance Department figures: $1.6 billion or nearly $40 billion greater than Treasury estimates deep in the red less than six months ago.
All of this makes the compulsory doomsaying and lowering of expectations much harder to pull off this week for Mr Chalmers.
But the underlying structural deficit he has been complaining about, or the inability to pay for the rising cost of basic services, has not got any better and stands at something like $50 billion a year from now until forever.
The New Daily understands that a recent outcry over the base rate of $50 a day for those on the JobSeeker appears to have been heeded in government.
But if the rate of the dole were lifted, it’s unclear whether it will be near the raise to $70 called for by economists such as Treasury Secretary Ken Henry last week.
What’s in store
Mr Albanese won’t be around for the days leading up to budget day on May 9 while attending the coronation of King Charles – leading to a recent rash of pre-budget “exclusive news” slightly ahead of schedule.
As foreshadowed previously, the government will reportedly be unveiling a crackdown on vaping (which is unregulated and so escapes government tax).
An expected increase in the budget for Labor’s ambition to raise standards in aged care might also be offset by a watering down of a plan for 24/7 nurses, which has met complications in the international labour market.
Another $1.5 billion will fund consumer energy relief packages.
Mr Richardson says the evidence so far suggests a government that is continuing a modern political trend of not deviating from their predecessors.
“By and large this is a government sticking to its promise of not doing much,” he said.
Figures suggest the government won’t break with election pledges not to levy new taxes and to roll out a limited reform package otherwise.
Speaking on background others say there is a widely-held expectation among MPs that shaving down much of the Stage 3 tax cuts for high-income earners will be announced before they take effect in July, and as part of a package the government will campaign on at the next election.
“The underlying assumption is that the problems are slow-moving enough that waiting until after the election isn’t that dangerous,” Mr Richardson said.
“Maybe that is true in some areas of policy, probably. But in others?”
One area for potential reform in the coming budget is the lenient taxation system acting on the multinational companies extracting and exporting Australian gas for a fraction of the tax paid in other countries.
Modelling by the Grattan Institute shows making fossil fuel companies pay their fair share would bring in $8 billion.
The non-partisan policy experts are calling for the government to follow the example of the hugely popular policy it adopted to stop tax evasion and increase equality in superannuation.
Dr Chalmers found about $2 billion in revenue after fighting to lessen tax concessions given to wealthy Australians with more than $3 million in their superannuation accounts (including one individual holding $400 million in super).
Government analysis found at its upper echelons the system was being used to dodge tax, not save for retirement.
Dr Chalmers fought hard and made the case for stopping tax breaks for Australians with more than $3 million in their accounts.
The Grattan Institute released new modelling on Sunday on the distribution of wealth in Australia that implicitly makes a powerful case for going further and generating a potential further $11 billion in super concessions that could fund reform.
The typical retiree in Australia has a mere $5000 in their super account, proving just how skewed the current system is against fairness.
Government figures show that the value of tax breaks to those with much bigger balances will soon cost more than the aged pension, which people with low balances like these rely on.
“Further changes are inevitable – whether in this budget or subsequent budgets – if the government is to have any hope of getting the budget on a more sustainable footing while meeting spending needs,” said Brendan Coates, the institute’s director of economic policy.
