The 2023-24 federal budget was leaked so much that it was almost DOA.
Figures for economic growth, deficit, tax changes, unemployment and wages were all dropped by the Albanese government to basically kill off the news oomph usually said to be the measure of how good a budget is for a federal government, or how bad if there is a major kerfuffle on the days after the document is revealed..
The surplus for the financial year to the end of next month (June 30) is forecast to be a surplus of $4.2 billion, compared with the forecast in the last coalition budget a year ago of $78 billion and a forecast of $36.9 billion in the financial statement from Treasurer Jim Chalmers last October.
The budget forecasts economic growth to slow from 3.25% in 2022–23 to 1.5% in the year to June 30, 2024 and 2.25% in 2024-25.
“Despite this, our economy will continue to create jobs and unemployment is expected to remain low by historical standards – 4.25% in 2023–24, 4.5% in 2024-25,” the Treasurer said last night. That would be up from 3.5% in March.
But the deficit is forecast to quickly return and is forecast to be $13.9 billion in 2023-24 and more than $35 billion in 2024-25.
In an immediate reaction, ratings group S&P said last night after the budget had been revealed it believes the federal government’s budget remains in deficit – albeit a small one – and warned the government must remain committed to spending discipline.
“The government’s commitment to fiscal discipline, such as saving revenue upsides, remains critical to our ‘AAA’ rating on Australia as long-term challenges linger,” S&P director Anthony Walker said.
Walker said that looking at the headline cash balance – which includes investments, foreign aid, and off budget spending, providers a better idea of the position and strength of the government’s finances.
“We expect headline cash deficits to remain about A$15-25 billion per year,” he said.
He said S&P expects inflation to remain “stubbornly higher” than the Reserve Bank’s target range of 2-3 per cent until 2026.
“While the government has shown spending restraint in the face of growing demands, handouts in today’s budget may add to inflationary pressures,” Walker said.
“A sharp slowdown in economic activity that weakens the general government budget, causing debt and servicing costs to rise, could pressure the ‘AAA’ rating. A sharp fall in commodity prices could also reverse recent gains in Australia’s external accounts and add to downward pressure on the ratings.”
The government is helping pay for this by with new or higher taxes and charges that add up to $19.9 billion over five years ($4 billion a year), including more tobacco excise, a higher passenger movement charge on travellers, a tax integrity crackdown, visa application charges and the higher Petroleum resource Rent tax which is really a pull forward of tax that would have been paid in future years.
And economists point out that there are signs in the budget documents of new policy decisions to be announced by the government either in the mid-year update in December or in a year’s time.
The rental deductions for property owners are forecast to cost $26.6 billion in tax revenue in 2023-24, (far more than the $13.9 billion deficit estimated for that year).
The concession on capital gains tax for investors in property and other assets is forecast to cost $10.5 billion in the same year.
And the stage three tax cuts are now forecast to cost $21.5 billion when they start in 2024-25.
That covers most of the $35.1 billion deficit the Treasury is predicting for that year.
The stage three cuts will cost $69 billion over the four years to June 2027.
That’s why economists see more changes on the revenue side to come to attack the structural deficit.
The two major public broadcasters are big winners, with the Australian Broadcasting Corporation (ABC) and Special Broadcasting Service (SBS) set to receive more than $7 billion over the next five years to boost local news coverage.
Social welfare spending is a big part of outlays – $14.6 billion in spending to alleviate the cost of living for voters, including up to $500 deductions from power bills for five million families.
And $1 billion will be spent funding low-cost loans for families to install double-glazing and solar panels to better insulate their homes and use less electricity.
$14 billion for aged care workers, $3.5 billion more to boost bulk billing levels at GPs. Trying to boost Medicare will cost $5.7 billion all up.
There’s a $40 per fortnight increase for JobSeeker recipients as well as for those on Youth Allowance, Austudy and other income support payments.
Those on JobSeeker aged 55 will receive extra support that is normally given to those aged 60 and above. That’s $4.9 billion.
The single parenting payment that mostly goes towards single mothers will be extended for six years, meaning they will be eligible until their child reaches the age of 14 instead of 8.
