Blasphemy, Blatancy and The Budget

Blasphemy, Blatancy and The Budget

Reviewing the Budget Forecast for 2024-25

E. Y. Nam

THE OFFICIAL BUDGET FORECAST was released two Tuesdays ago on 14 May. Mind you, I might have completely villainised the Treasurer in my title; however, heavy criticism and insults are not what I’m here to do today. I am merely giving an objective perspective on the forecast so that you can decide for yourself if you’re going to either 1) start putting up Jim Chalmer posters all over your bedroom walls and send him some fanmail, or 2) start a riot.

Jimmy yapping

For starters, remember economic growth can be measured through aggregate demand (AD) whereupon any increase in the components C + I + G + X – M leads to an increase in economic growth (yes, I know, I am yapping for most of you, but the economics students know what I mean). First of all, the Budget is projected to have a second consecutive surplus of $9.3 billion.

In terms of the Budget’s impact on Consumption (C) (Consumers):

  • $300 savings in energy bills (rebate); essentially a cash handout to everyone without literally “handing” the money, as that would be fraudulent and illegal. This costs around $3.5 billion over three years.
  • Australians with lower incomes and welfare payment systems are set for a boost in Government rental support (Commonwealth Rent Assistance).
  • Just under 1 million Australian households renting in the private market will enjoy a 10 percent increase on the maximum rate of rent assistance available (builds on a 15 percent increase from last year… so 25 percent in total for the mathematicians out there).
  • Three billion reduction in student debt through changes to HECS and Help loan programs
  • However, minimal relief is provided for middle to high income renters.
  • Further, Stage 3 tax cuts: Australian workers will receive a cut in income tax paid ($324 billion over the next ten years).
  • Therefore, the budget outcome is expected to benefit around 14 million taxpayers (i.e. a worker earning $90,000 per year will receive a tax cut of $1,929).

In terms of the Budget’s impact on Investment (I) (Financial Institutions):

  • Subsidies, grants and other supports are aimed to be provided towards renewable energy manufacturing businesses (solar panels and green hydrogen).
  • A $1.5 billion boost to local battery manufacturing operations will be conducted in order to increase the resilience of supply chains from countries such as China.
  • $6.7 billion over ten years on Hydrogen Production Tax Incentive (with $2 per kilogram of locally produced renewable hydrogen from 2027-28 onwards).
  • Finally, an Instant Asset Write-off extension (which deducts the full cost of eligible assets under $20,000).

In terms of the Budget’s impact on Government Expenditure (G):

  • Government budget is projected to be a surplus only by virtue of significant savings on the National Disability Insurance Scheme (NDIS) (Predicted to be spending $14 billion less on the scheme over four years).

In terms of the Budget’s impact on Unemployment:

  • 15,000 fee-free TAFE places and up to 5,000 pre-apprenticeships will be created in a bid to boost construction and housing workers.
  • We will also see an increase in school funding from 20 percent to 22.5 percent.
  • $250m investment into fee-free university ready courses to help those who missed a place at university.

In terms of the Budget’s impact on Distribution of Income and Wealth:

  • $1.1 billion over four years to pay superannuation on government funded paid parental leave from July 2025, attempting to address the gap apparent in retirement incomes.
  • A raft of women’s health initiatives, totaling $56 million

In terms of the Budget’s impact on Inflation

  • The budget aims to strengthen economic growth and unemployment without increasing inflation, which is quite a hard thing to do.
  • Moreover, with the annual Consumer Price Index (CPI, basically inflation in technical terms) at 3.6 percent currently, many critics claim that there is still room for improvement (2-3 percent is the target range)

Criticism (subjective and not my opinion, of course) of the Budget forecast:

  • Despite a projected surplus, years of deficits are expected to follow. It is also potentially inflationary as government spending is quite significant.
  • Moreover, it opposes sentiment from RBA and Michele Bullock, where their priority remains with taming inflation rather than risking to inflate inflation even more.

Summary of Budget Forecast’s statistics. As you can see in the top right, deficits set to follow.

Well, there you have it. Make of it what you will!