A Missed Opportunity for Labor to Do the Hard Yards

Treasurer Jim Chalmers hands down the 2023 Budget in the House of Representatives at Parliament House in Canberra, Australia on May 9, 2023. (Martin Ollman/Getty Images)

Commentary

Budgets set priorities.

Be it a household, or business enterprise a budget will not only tell you about the source of anticipated income but also where the expenditure and investment for futureproofing is directed.

Budgets provide a window into the thinking and aspirations of those involved.

Government budgets are no different except for one vital and very telling point—governments do not earn income like households and businesses.

Governments simply take other people’s money. They tax the rewards of other people’s hard work and entrepreneurship, in turn, they need to ensure the viability and growth capacity of the productive sector or risk stifling it.

Last night’s budget delivered by Treasurer Dr. Jim Chalmers highlighted the huge and unhealthy reliance on Australia’s commodity exports—coal and iron ore—for a surprising boost to the national income which will help finance huge expenditures and provide a one-off surplus that will immediately disappear.

While continually condemning coal-fired power stations and providing barrow loads of subsidies to the renewable energy sector, the government is raking in literally billions of dollars from countries, like India and China, that buy our coal and iron ore.

Those billions are then used for the subsidies and the backup generators needed to push toward net zero. Would it not be cheaper to use some of the coal ourselves?

It would be cheaper for households and businesses, and in turn, drive down the cost of living.

Further, some see this over-reliance on commodity income as not sustainable for Australia’s long-term prosperity. They are not wrong.

Spending and Deficits Continue

Speaking of the long term, the ever-expanding list of expenditures in the budget will see the country’s finances plunge back into deficit quickly.

There is no doubt that many people are doing it tough. Balancing family budgets has become a nightmare for far too many people.

So the government’s oft-stated and specific focus on reducing the cost of living will be very welcome right across the country. At least in the short term, the government is delivering on its promise to leave no one behind—for the time being at least.

The conflict which Labor faces will be all the extra spending on increasing pay for aged care workers, subsidies for the unemployed, funding the National Disability Insurance Scheme, raising payments for single parents, and childcare subsidies will all channel into aggravating inflation.

This, in turn, will fuel cost-of-living and interest payments on mortgages which have soared in recent years stretching many household budgets to breaking point.

Support for the Drivers of Economic Growth Missing

Maintaining the budget is a difficult juggling act, especially so given the commitments made to the economically non-productive sectors of society.

To keep these expenditures going there will need to be economic growth in Australia.

The absence of a concerted focus and incentivisation for the economic builders and wealth creators of the country is short-sighted.

The $432 million fund to assist businesses to commercialise ideas is to be applauded. While $432 million does appear to be a huge sum of money (and it is) a similar sum of taxpayer funds is being thrown at The Voice referendum.

The $20,000 instant asset write-off will allow the small business sector to upscale and modernise which will also stimulate growth. But the task to incentivise economic growth is greater than such sweeteners.

A Missed Opportunity for Labor

Chalmer’s claims of fighting inflation and cost of living pressures with this budget look unlikely, especially in the longer term.

Smoke and mirrors is often the stuff of budgets and this one is no different. It is too much of a political budget rather than a nation-building one.

It is early into the Albanese government’s term and while enjoying high levels of popularity, Labor could have expended some of its undoubted political capital in tightening eligibility criteria for welfare and encouraging people to become active and productive contributors to their economy.

Long-term budgeting, preparing for the future, is the task of statesmen.

Handing out lollies funded by debt allows for short-term popularity but does deep structural damage to the budget while raising undeliverable long-term expectations within the populace. A terrible disservice to all. That is what populism achieves.

Housing ‘Solution’ Falls Short

These welfare increases are being baked into the budget process meaning future governments will find it nigh on impossible to reverse.

A lot of the extra expenditure is short-termism at its worst. The increase in rent assistance, while providing short-term relief, will see rents go up. If rentals are to be reduced the supply of properties needs to be increased, and not the amount of money.

Similarly, the increase in social housing will simply see government compete with the private sector for land, builders, and supplies—driving up the cost for each as they compete for limited resources and labour.

Abolishing unnecessary regulation and red tape, thereby relieving the financial burden on developers, would allow a quicker and more affordable build for consumers.

On top of this, the budget predicts a greater intake of immigrants. Skilled migrants come with all sorts of benefits but one thing they surely don’t bring with them is a house. Immigrants, not being snails, do not carry their homes with them.

As such the government needs to address the fact that such a large migrant intake will only exacerbate the already sizeable housing shortage.

No Long Term Strategy In Sight

The forecast that wages will rise quicker than inflation is also not sustainable unless it is inextricably linked to productivity.

The lack of any commentary to that effect suggests this has not been factored in, meaning the inflation spiral will be accelerated. And inflation hurts everyone, but at the end of the day, especially those already in poverty.

The government has exposed where its thinking lies. In the name of assisting those deemed to be in need in the short term, there has been a singular lack of focus on long-term vision and sustainability, which requires more than unexpected windfall gains courtesy of our commodity sales.

With an $887 billion deficit payable by a population of slightly over 25 million, serious action needs to be taken to curtail expenditure.

Instead, we have seen massive expenditures baked into future budgets underpinning the non-productive sectors of the Australian economy.

That is not “social justice” especially when it is not sustainable economically, just ask the Venezuelans.