Budget 2024 Overview

BUDGET 2024 OVERVIEW

Budgets are about the choices the government makes, not just government revenue (taxes) and expenditure (services and social transfers) in the context of the domestic economy.

Then there is politics.

Last night was no different.

An appealing surplus – but for how long?

The headline Budget surplus for 2024 is $9.3b following a $22b surplus in 2023.  This is welcome, particularly in the context of the $900b of gross national debt raked up during COVID, and the international economy and events such as the Ukraine war and COVID have their clear impacts.

But as with households, Government debt must be repaid eventually by future taxpayers.  So it is certainly crucial not to be adding to debt with deficits when the economy is doing okay, as it had been before inflation became a problem.

And the outlook now is for deficits, adding to the national debt.

Where it falls short

The fight against inflation is necessary for our future prosperity.  Ideally the two arms of economic policy – the government’s fiscal policy and the RBA’s monetary policy – should work together to minimise the total pain, ensure that pain is evenly spread and, critically, support the most vulnerable and disadvantaged.

On this measure, the Budget falls short.

Extra spending and forecast deficits are expansionary from next year.  As are some of the specific measures. The recalibrated Stage 3 tax cuts, notwithstanding being more equitable than the original version,  will put extra cash in the pockets of all taxpayers.

Cost of Living relief, but who misses out?

The $300 energy relief similarly billed as cost-of-living relief also goes to all households.  The Treasurer made much of the impact of this measure on reducing inflation.  While it will reduce the published CPI, the RBA focus is on underlying inflation stripping out one-offs.

Where the Budget also misses is supporting the most vulnerable – those on JobSeeker have been left with only CPI adjustments and Commonwealth Rent Assistance increased by just 10%.

Housing

Even on housing, supply constraints are a major driver of inflationary rent stress. The forecasts indicate no increase in private dwelling investment in 2024-25, after a 3% fall in the current financial year.

Only in 2025-26 is there a forecast lift in private new dwelling construction.

Productivity

While there is a lot in the Budget about the Government’s future manufacturing plan through its Future Made in Australia policy, what continues to be absent is any comprehensive tax and spending reform and measures to lift productivity.

 

 

 

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