Shortcuts / 31 March 2022
The pre-election Budget
The Federal Government handed down its latest Budget this week, including some big-ticket items designed to win your vote in the upcoming election. So in this Squiz Shortcut, we look at the health of the economy as we recover from the pandemic, the sweeteners in the Budget, and the politics of it all as we sprint to the ballot box.
Don’t we usually do this in May?
Yes, the Federal Budget is usually delivered in the first couple of weeks of May when the government has more economic data from the current financial year on its hands.
Has COVID stuffed this up too?
No, not this time… It was brought forward because in the next few days we’ll officially be in an election campaign and the Morrison Government needed to deliver it now so it can point to how it’s going to fund its election promises.
Right. Remind me what a Budget covers again…
Essentially it’s the annual financial stocktake. It looks at how much money it has coming in from us, the taxpayer, and how much money it has to allocate to things like welfare, health, education, defence, and infrastructure. It’s the government of the day’s chance to set out its policy priorities each year. Or in the Morrison Government’s case this year – it’s a chance to lay out its vision for the next term in government.
Which is important, right?
Particularly this time around. Pre-pandemic, we were headed towards a Budget surplus for the first time since 2007, but like much of the world, we suffered our biggest economic shock since the Great Depression in 2020 thanks to the pandemic.
How did the Morrison Government respond to that?
It spent and spent big… The last check-in showed the government – aka taxpayers – had stumped up $314 billion in direct economic support as a result of the pandemic. To put that in perspective, that’s about 2.5 times the amount the federal government spends on health in a year.
Does that mean the government’s been accumulating more debt?
Yep, and we’re running significant deficits as well. And just to note, debt is money owed and the deficit is when spending exceeds revenue.
How’s Oz doing on that front?
Better than expected… The Budget deficit is expected to be $78 billion next financial year – that’s down from an expected $99 billion. And net government debt is set to rise to $714.9 billion, down from the predicted $835 billion.
So it’s improved quite a bit?
It has, and Treasurer Josh Frydenberg says our economic recovery is well and truly on track. And the main factor behind our bounce out of lockdowns and COVID is the surge in employment.
How’s that tracking?
Frydenberg says there are 2 million more Aussies in work than when the Coalition came into power in 2013. That means more of us are paying income tax, and the economic wheels are turning faster. That’s good for businesses and individuals – and for governments collecting tax from our economic activity.
What else has played a part in getting things back on track?
Well, there are some things the government can’t really take credit for. For example, commodity prices have been high, with things like mineral resources getting good prices. The government gets a chunk of that, too.
So what are some of the big-ticket items in this Budget?
The headline grabber was cost-of-living relief. That was considered necessary as COVID supply chain issues and the war in Ukraine has seen price spikes in things from groceries to petrol.
Gimme the deets…
The $8.6 billion cost-of-living package slashes fuel excise by 22c/litre for 6 months. That will deliver savings of $10 a week to people driving average kilometres in an average-sized car. The package also gives 10 million low and middle-income earners a one-off bonus tax rebate of $420 and $250 payments to 6 million pensioners and welfare recipients.
Any other big-ticket items to note?
The Nationals also secured up to $34 billion for the regions in return for their support for net-zero emissions by 2050. That will go to a range of things like building dams, building regional economic hubs, and improving infrastructure like telcos. There’s also money for defence, cyber security, jobs, and training.
So it’s clearly a pre-election Budget…
It is, and the thing to remember is that it might never see the light of day. That’s because the election will be held before the next financial year starts, and the polling says that the Coalition is going to find it hard to hang onto government…
What will happen to the Budget if Labor wins the election?
Well, there are some measures that Labor says they will endorse immediately, like the cost-of-living package. But for many other measures, they’re up in the air if the government changes. For his part, Treasury spokesman Jim Chalmers said he thinks the Morrison Government’s approach is “a pretty desperate political ploy when the country needed a plan for the future”.
Speaking of Labor, how would they approach it if they win the election?
Good question and we got some details on that last night. Anthony Albanese said his plan “isn’t radical. My team and I are promising renewal, not revolution.” To that end, Labor is supporting what the government’s doing in areas like providing support to help Aussies manage cost of living pressures.
And the rest?
Well, Albanese did announce a $2.5 billion aged care package last night and said more policies and their costings will be announced during the course of the election campaign.
So who are better managers of the economy?
That’s for you to come to a conclusion about. See, aren’t elections fun?
Ok, so what are the big issues with the economy right now?
Inflation’s up the top when it comes to issues. The government doesn’t have a crystal ball, and a lot of the factors contributing to it are out of their hands – such as the war in Ukraine which sent oil and petrol prices up. But it forecasts inflation to fall from 4.25% this year to 3% next year and under 2.5% for the 2 years after that.
Does that mean workers will be better off?
It depends on whether wages growth is sitting above inflation. The Budget assumes wages growth will hit 3.25% next year – but with a lot of one-off bonuses, so not a sustained pay rise – and then be 1% higher than inflation the year after.
So inflation is going to be a tricky issue?
Yes – for whoever wins the election. And how each party plans to respond will be a big part of this election campaign.
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