Emphasis on handouts, the budget contains few negatives

What the Reserve Bank thinks of Chalmers’ budget will be almost as important as voters’ views, writes political columnist MICHELLE GRATTAN.

Jim Chalmers has produced a benign third budget aimed at mollifying voters in dire straits over their high cost of living and punishing interest rates.

Michelle Grattan.

At the same time, he has been walking a tightrope, trying to prevent the handouts from making things worse rather than better.

Despite how it looks, it is unlikely that this will be THE budget for the elections. With the poll due in May next year, Anthony Albanese is still expected to serve a full term.

His very narrow parliamentary majority and the grumpy mood of voters would make an election this year a risk. This means that another budget can be expected around March. The Prime Minister has indeed indicated this.

An early ‘election budget’

But this budget still keeps the elections firmly in mind. Voters’ moods need to be improved, and Chalmers hopes the relatively substantial aid will help this. And the government urgently needs a drop in interest rates – hence the emphasis on caution so that the expected fall in inflation materializes.

What the Reserve Bank thinks of this budget is almost as important as what the average voter thinks of it.

So, as Chalmers told us, the Treasurer has had to combine economics and politics.

The universal help on the energy bill and the extra rental subsidy fit in nicely with both wishes. They provide relief that reduces inflation (at least in the short term) rather than increasing it.

The biggest relief, of course, will come from tax cuts, which themselves are the equivalent of a cut in interest rates. The government’s decision early this year to recalibrate the stage 3 tax cuts, meaning all taxpayers will receive a price, has long been confirmed; the broken promise has disappeared from most memories.

Beyond struggling households, the government’s budget has paid close attention to certain constituencies, including women (paid parental leave pensions and more) and young people (changes to HELP indexing and placement payments).

Handouts galore, negatives hard to find

However, many wellness advocates will be disappointed. While they will welcome the housing benefit, the Economic Inclusion Advisory Committee’s recommendation for a major boost to overall job-seeking levels has not been met (although there has been an increase for Australians with only partial employment capacity).

With an emphasis on handouts, the budget is also remarkably light on the negatives. Whatever bad things it has are limited or well hidden.

The future large deficits indicate that the government has postponed a serious attack on the structural deficit for another day. Or some other term.

The Budget launches the Prime Minister’s signature Future Made in Australia policy, which will cost $22.7 billion over the next decade.

The government hopes that voters will make their immediate judgment on the budget based on the criterion ‘what is in it for me?’ With Future Made in Australia, it trusts people to respond to the ‘vibe’ – the idea of ​​Australia becoming an energy superpower, or making more things.

Chalmers and Albanians justify the policy, which includes expensive fiscal stimulus, largely on the basis that other countries are playing in this space, and Australia should not be left behind. Maybe. But many respected economists condemn it as little more than old-fashioned interventionism and picking winners.

However, it will be years before the wisdom of some of the policy investments can be properly assessed, so the government will be reasonably confident that any backlash is likely to be a long time coming.

Albanese told the Labor caucus on Monday that this was “a Labor budget through and through”.

It’s a pretty accurate description. It is generous in expenditure, with an ideological twist. The critics will say it’s too ‘Labour’ for the times.


The conversation

Michelle Grattan, Professor, University of Canberra. Republished from The Conversation.