It’s Budget week, and it’s been hard to miss the news the Albanese Government has delivered our first surplus in 15 years… So in this Squiz Shortcut, we look why being ‘back in the black’ is such a big deal, what’s in the Budget, and the big economic challenges still facing Oz.

It feels like we just had a Budget not that long ago…
You’re not wrong – we had one last October.

So why have we gotten another one now?
Sometimes elections throw off the Budget cycle – they’re normally handed down in May – but then the federal election was in May last year – so the new Albanese Government didn’t want to wait a full year to signal their spending priorities.

Umm, what was in the October Budget again?
It was what we call a mini-budget – so not the full bells and whistles. A few things it included was paid parental leave increased from 20 to 26 weeks at a cost of about $500 million; there was a big increase to childcare subsidies; and another biggy was reducing the cost of medicines. So the maximum script cost for any drug listed on the Pharmaceutical Benefits Scheme, went from $42 to $30.

It’s all coming back to me now…
And skipping forward to this week – the big news is the government is expecting to have a handy $4.2 billion in its wallet at the end of the financial year- rather than a big fat wad of IOUs.

Why is that such a big deal?
So there is a long political history to all of this but in a nutshell – getting the Budget back in surplus has been a really big deal, especially since the days of the Howard Government. Then-Treasurer Peter Costello would use the phrase “back in the black” to whack Labor about deficits when he came into office in 1996, so for the Coalition it’s really been the key bottom line figure that’s led them to claim they are the better economic managers.

Okay, so it’s a big deal for Labor…
Yep – because they get to break what was kind of a curse. This is the first surplus since 2007 which was John Howard’s last year in office. Now remember, Kevin Rudd’s Labor government was on track to deliver a surplus and then the global financial crisis hit. The Morrison Government would have also delivered a surplus in 2020 – but then the pandemic hit.

It proves forecasting this stuff is a mug’s game…
Yep, it really does. So really with all the spending during the pandemic (remember Jobkeeper alone cost $89 billion…) and the grim global outlook – everyone thought it would be deficits as far as the eye could see… In the October Budget, Treasurer Jim Chalmers said the deficit would be $37 billion.

Why the big turnaround?
There’s a couple of things – first is our ultra-low unemployment rate of 3.5%. So there are more people in work – which means more income tax comes to the Government – and they aren’t paying out as much welfare. And the 2nd thing is prices of our iron ore, coal and gas exports are soaring and keep delivering the government a financial windfall.

And is that expected to last?
Well, the bad news it it’s going to get worse from here. We are expecting the weakest global growth in 20 years over the next 2 years and Chalmers says Australia can’t escape it.

Alright, hit me – what was in the Budget?
So Jobseeker will be increased by $40 a fortnight in September, with over-55yos set to get a bit extra. And if you’re on Youth Allowance or Austudy you’ll get the same increase – all up that will cost about $5 billion. That’s just one part of a $14.6 billion package to help lower income Aussies.

What else is in that package?
The government’s also going to help out with rent. So about a million households are eligible for Commonwealth Rent Assistance, and they could get an extra $31 a fortnight – costing a total of $2.7 billion.

And there was something about bulk-billing?
Yep this is a biggy – people complain all the time they can’t find a doctor who will bulk bill and the Government reckons this Budget’s going to change that. It’s tripling the incentive it pays to doctors to bulk bill children, and anyone on a concession card. That’s over 10 million Australians and it’s going to cost $3.5 billion over 5 years.

I’m noticing a real cost of living theme…
You got it. There was a bunch of stuff that got announced before Budget night too; so families and small businesses will be getting around $500 relief on their energy bill depending on where they live. That will cost the federal coffers $1.5 billion. And one close to the heart of the PM Anthony Albanese given his own experience being raised by a single mum is that the supplement for single parents on Jobseeker will be extended until their youngest child is 14yo.

And that used to cut out earlier?
Yep, when your kiddo turned 8yo. That will cost around $2 billion over the next couple of years and give those parents an extra $175 a fortnight.

Anything else?
The wage rise for aged care workers goes into this Budget. More than $14 billion will be spent to fund a 15% pay boost – so that’s an extra $7,000 a year coming for some of our lowest paid workers.

Wow, a Budget is kind like Christmas…
Not so fast… It’s not just handing out cash everywhere – you’ve got to pay for it somehow, so there are some cuts as well.

Like what?
Well, the Treasurer says they’ll save about $8 billion from defence projects by cutting the number of armoured vehicles it planned to buy. And they are increasing the tax on companies drilling for offshore gas by $2.5 billion and getting another $3 billion from higher taxes on smoking and a crackdown on vaping.

A packet of cigarettes already sets you back a pretty penny…
Yeah, and they’re only going to get more expensive. So they’ve made smokers mad – and the other group you might have noticed they’ve made really mad are pharmacists.

What’s that about?
So the government’s going to save more than a billion dollars over 4 years by allowing patients to collect 2 months’ worth of medicines on a single script instead of needing to go to the chemist every month.

So is the government throwing itself a surplus party?
It’s actually all been pretty subdued… To put it bluntly, the Treasurer knows it’s not going to last and he doesn’t want to set himself up for future years when this likely disappears just as quickly as it came.

What’s being forecast?
Treasury is currently predicting a $14 billion deficit next year, a $37 billion deficit in 2025-26, and deficits all the way to at least 2033-34…

Why so many deficits?
So there’s a lot of spending on the horizon on big programs like the AUKUS submarines, pensions, the NDIS, aged care – all those costs are rising. Economists call this a structural deficit because we just won’t have the revenue to pay for them all as unemployment goes up and commodity prices fall.

And the Budget didn’t have all the answers…
Nope, and Chalmers has warned there will be many difficult decisions ahead. The PM said last month that he was on a mission to save the NDIS from blowing out and becoming unsustainable. So that means slowing the number of people going onto the scheme.

So what’s going to happen?
That’s the billion-dollar question… Chalmers says fixing it all will take more than one term of government. There’s some thought that means Labor will go to the next election with a plan to increase taxes, or scaling back the tax cuts that are due to come into effect in July next year.

Because they are going to cost a lot?
Yep, they are estimated to cost the budget $243 billion over a decade. And you can bet the government would love to bank that but as we know it’s pretty dangerous political territory to walk back election promises – which is why they’d likely go to election before changing anything.

Until next time, then…
Yep, we’ll see you there.

Squiz recommends:

A guide to the Budget winners and losers from The Age and ABC News