In this, his second federal budget, Treasurer Jim Chalmers appears to have delivered on promises to provide cost-of-living relief to many, while also making Australia more resilient to global economic uncertainty and keeping a lid on inflation.
This budget has been quite the balancing act.
But in light of this being Australia’s first ‘surplus’ budget in 15 years – largely due to increased revenue from higher commodity prices and a strong labour market – Treasurer Chalmers has had the advantage of having some money to spend.
Headline policies for the Labor government have included forking out approximately $15 billion over the next five years in cost-of-living support.
While this could be seen to fuel, rather than tame, inflation – the Treasurer claims this spend will be offset by targeting key areas that drive inflation. He believes that the substantial one-off energy bill discounts going to approximately 5.5 million low-income households and one million small businesses will relieve the pressure on many as rising energy costs contribute about one-third of the overall inflation rate. Many economic think-tanks have already countered this view and believe that freeing up money on one front may result in additional expenditure on another.
An increase to JobSeeker payments has also been announced, although at a rate lower than Labor’s Economic Inclusion and Advisory Committee suggested. This is in addition to reductions in child-care fees and lower taxes for those in the aged care sector. These measures are good news for recipients, but the economic question remains – can targeted economic relief lower inflation? And what response can we expect from the RBA? Many of these policies appear to run the risk of causing a substantial increase in demand.
The Treasurer has also committed increased funding for defence to cover the costs of acquiring, constructing and operating the nuclear-powered submarines purchased as part of the AUKUS pact. As this is a long-term arrangement, the onus will be on future budgets (and likely future governments) to shoulder this cost. No doubt debate will continue on the adequacy of the Treasurer’s plans for funding this.
Overall, this budget appears to have been designed to acutely address cost-of-living pressures. Whether it has done enough – only time will tell.
Our team of experts have collaborated to share their insights of what the budget means for you, your family, and your business.
If you have any questions about how this budget impacts you and your business, please contact your local Bentleys advisor.
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