The government has attempted to marry two typically opposed ambitions in this week’s budget – a return to its reputation for fiscal discipline after the pandemic, but also to offer “immediate relief” to families struggling with living costs.
As much as any before it, this budget will be a political document.
Generosity is, as a rule, the defining feature of an election budget. But with the election likely to be called no more than weeks away from Tuesday, politics has weighed as heavily on the production of this budget as any before.
But now economics appears to be intruding more than usual.
Increasing the circulation of money in an economy – such as by handouts – only serves to increase inflation, which is currently running at 3.5 per cent in Australia, with some higher forecasts.
Treasury boffins are wryly remarking that by setting out to kill inflation the government is only worsening it and for seemingly no long-term payoff.
But politically, this is a wicked problem for a government seeking re-election.
Not doing anything on cost of living would be politically tin-eared. Doing something, many experts say, will only make the problems worse.
Some Liberal MPs, or at least those who believe they can still win the May election, even believe the Prime Minister’s rhetoric that budget day will be the first victory in a battle that shall lead the government to a famous victory.
Given the days of the old militant lockout secrecy are long gone, there has been no shortage of advance announcements and stories handed to obedient journalists to help us piece together a preliminary picture of what the government’s last-ditch effort looks like.
Economic cushions
- The fuel-excise cut. Mr Morrison has all but confirmed that the government will in some way cut the fuel excise of 44 cents for every litre of petrol. Sources in Parliament expect a much more dramatic move than John Howard in 2001 (who simply froze that at where the tax rose with inflation), something in the order of a 20-cent-a-litre cut
- A cash splash. Josh Frydenberg last week announced plans for a “targeted” cost-of-living package in the budget. All talk in Canberra suggests the aim of this initiative will be low-income workers and pensioners to receive about $200 but possibly more being paid to aged pensioners in a one-off sum. It’s extremely reminiscent of another pre-election cost-of-living policy, paid by John Howard to the same group in 2001
- The press gallery has been equivocal on the question of whether a tax offset for low- and middle-income workers on up to $125,000 will continue to receive an annual $1000 rebate. The tax plan was introduced as a one-off, four-year measure that came at an estimated cost of $8 billion to government revenues. But despite anger in the Coalition party room, many are finding the case against the offset difficult to make so close to a poll
- Tens of thousands more first-home buyers – or double the 25,000 to whom the incentive was first made available – will be eligible for a scheme that allows them to access property with as little as a five per cent deposit, the Herald Sun reported
- Increases to welfare and pension payments were introduced in March and will cost more than $2 billion in revenue
- Some $1.85 billion in 2022-23 will help small businesses manage their cash flow by lowering instalment payments they had needed to pay.
Defence of the nation
- It feels like a long time since Mr Morrison mentioned the importance of Australia’s national defence and, accordingly, he let some of the budget’s bigger defence announcements out of the bag early. A $10 billion facility to operate the submarines will be built on the east coast and a WA shipyard will be upgraded, bringing the total spending to nearly $15 billion, when extras are included. Sounds like a lot for a department with a budget of only $44 billion. But it’s not nearly enough to make Australia’s nuclear submarine program work. Several experts and those close to the defence industry say the problem can only possibly succeed with an unprecedented hike in levels of defence spending
- There has also been $282 million directed towards building new defence installations in the NT, as the government announces plans for the single largest expansion of the size of the defence forces in peacetime.
Child care
Many have already forgotten an expansion of childcare subsidies, announced by the government last year. They took effect in March and gave extra money to parents with more than two children in child care. But that did not stop Liberal Dominic Perrottet from arguing that the state Liberal government was better off to manage the issue.
Infrastructure
- The National Broadband Network, they say, does not go so hot in the bush. Luckily the government has a plan. Up to one million homes in regional Australia will receive free wireless network upgrades
- Antarctica. Australia lays claim to a huge portion of the sea ice of Antarctica. Almost nobody else places any stock in our territorial claims, but we do. The government has rustled up $800 million for scientific research and exploration on the continent, which could also act as a proxy war over Chinese influence
- Let’s not forget some major infrastructural commitments: $4.3 billion for a new dry dock facility in Perth; nearly $50 million for the development of natural gas in the NT.
Regional Australia
- Rural and regional infrastructure commitments feature heavily in any Coalition re-election bid. This year we will see $500 million for a new Queensland dam Urannah; $678 million for improving a large stretch of the Outback Way and a further $2.26 billion in improvements in South Australia
- $5.4 billion will go towards the completion of Hell’s Gates dam in north Queensland
- More than $700 million will be set aside in the federal budget to support specialist medical training in regional areas. The project began in 2010.
- Mr Morrison announced a $60 million campaign to advertise Australia’s natural wonders to the world.
This list does not purport to be complete.
Some announcements were too small for inclusion. Increasingly, others are released via local candidates’ social media pages, making them difficult to track.
We will give Labor the same treatment in the coming days.
Different observers have said that a successful electoral platform needs bold and sincere policy vision, while others favour a “catch all” approach, a party that appeals to most all interests and seeks to neither inspire or offends.
Will Tuesday’s final Coalition budget lend itself to an election reshaping narrative? We’ll soon find out.
