Extract from ABC News
Analysis
Will you be better off as a result of Josh Frydenberg’s fourth — and possibly last — budget?
A lot of Australians will be as a result of a six-month cut in fuel excise and once-off $420 lifts in tax refunds and $250 once-off welfare payments.
But, while the Treasurer can rightly celebrate the way the economy has roared back into life, and the budget bottom line recovered as a result, it is hard to think of a recent federal budget where the largesse has been so transitory and the outlook so full of potentially bad news.
Yes, unemployment is at 50-year lows and the government is forecasting higher wages growth.
But it is not forecasting that wages are going to significantly outpace inflation over the next four years, and the budget papers paint a picture of wages growth coming from people job-hopping and being paid bonuses and "non-wage allowances" by employers desperate to keep them.
It will not come through a general lift in underlying wage rates. In other words, most people will still be going backwards in terms of their income over the next four years, despite a historically tight labour market.
What's more, the budget papers openly acknowledge that interest rates are going to start rising in the next couple of months as monetary policy "normalises" and that they will keep rising until 2024.
So, just as the six months of support from the government fades just after the election, households will be facing higher mortgage payments.
And 10 million Australians will next year discover that the government is not only not repeating this year’s one-offs, but that it has taken away the so-called low- to middle-income tax offset which has been giving them a tax refund to help them through the pandemic for the past couple of years.
Two striking things
All these short-term measures distract from two striking things about the 2022 federal budget.
The first is that this looks very much like a Labor budget, even if the government has tried to camouflage this. There is a lot of emphasis on national security spending and regional investment. The Treasurer’s speech highlighted environmental spending and spending to "end" domestic violence and improve women’s economic position.
However, long-held ideological assaults have been quietly abandoned or shelved.
It's hard to escape the sense that second-guessing what Labor may promise during the election campaign has shaped a lot of this budget's key initiatives — along with a punt that Labor will quietly accept many of the decisions it has taken, such as removing the low- to middle-income tax offset next year.
Suddenly, there is a swamp of money for occupational training — much of which looks like it will be distributed through the states and (the much abhorred) TAFE system — in addition to incentive payments for both apprentices and their employers.
There is a most unCoalition-passivity in the way it accepts that spending in areas such as health, aged care and disability services is now escalating very fast.
It is quietly acknowledged deep in the budget papers that spending on aged care, for example, is likely to rise by 9.4 per cent in real terms over the next four years — and that's without the government making any material new decisions in that space.
There is an uncharacteristic generosity in an increase in the humanitarian refugee program for asylum seekers from Afghanistan, and a large, if short-sightedly short-term, increase in the foreign aid budget in the Pacific.
Lie back and let it happen
The second thing relates to the nature of the so-called budget strategy and what drives it.
The economic growth that is feeding the improvement in both the economy and the budget bottom line is the dividend of both a lot of that spending the government did during the pandemic, which is only now being unleashed by households, as well as surging commodity prices.
These changes in the economic forecasts — since December alone — have improved the budget bottom line in the coming budget year of 2022-23 by $38 billion and $114 billion over four years.
However, the government is spending about half of that 2022-23 improvement. And this reflects much of the rather vague fiscal policy it has set out for the medium term: Lie back and let it happen to you.
Let a stronger economy boost the coffers, try not to spend too much more than you are already spending but, otherwise, leave things pretty much unchanged.
How unchanged? Well, the government is forecasting we might be getting somewhere close to a balanced budget in 10 years' time.
But this will only be after continuing along for most of this decade with spending running at more than 26 per cent of GDP (a once-off step-up from levels closer to 24 per cent before the pandemic), while tax is stubbornly supposed to stay at 23.9 per cent of GDP. In other words, this budget complacently is talking about being comfortable with underlying deficits for the next decade.
It is true the budget's commodities forecasts are conservative and, if war and other uncertainty keeps prices higher for longer, the budget position could be looking positively splendid in another 12 months. But it will not be because of anything the government has done.
Josh Frydenberg says this is “a plan” for a strong economy and a stronger future. But it looks more like a weather forecast.
Laura Tingle is 7.30's chief political correspondent.
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