Treasurer's first federal budget welcomed by economists, but political reaction is frosty
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Jim Chalmers has been on a hiding to nothing with his first budget.
Less than half a year into the job of treasurer he is expected to ease a cost-of-living squeeze on the one hand, but also repair a budget locked into tens of billions of dollars of structural deficit by his predecessors on the other.
In the short-term the two aims are totally at odds, so perhaps it's little surprise that his first mini-budget does neither.
That has drawn predictable scorn from the opposition.
"Our starting point with this budget is that the real test for it is whether Labor was going to deal with the cost of living pressures Australians are facing," Shadow Treasurer Angus Taylor told 7.30.
"They didn't. It's very clear. If you're a typical Australian household, you're not going to see any improvement of your situation between now and Christmas."
It's a sentiment picked up and echoed around the chamber that is the press gallery at Parliament House.
But if you tune in to a different echo chamber, that of economists talking to each other and their clients, the budget reception has been vastly different.
"The treasurer should get a tick for delivering what was promised and for the degree of fiscal restraint," noted Jo Masters, chief economist at investment bank Barrenjoey.
"The government refrained from easy hand-outs to households who are grappling with cost-of-living pressures which should get a tick of approval."
And, within the economics profession, Ms Masters is far from alone in this view.
"The treasurer has shown restraint and allowed booming government revenues to feed into the bottom line," Judo Bank's chief economic advisor Warren Hogan told ABC News on budget night.
"This is critical to fighting inflation. The government should be commended for not making the RBA's job even harder than it already is."
And from the economists at Australia's biggest bank.
"The government has resisted the temptation to use higher-than-expected revenue flows to inject substantially more money into the economy," CBA's economics team noted.
"This outcome is welcome and should provide some support to monetary policy to help bring inflation back under control."
I could provide many more similar quotes. This was what economists call in the jargon "a consensus view" — in other words, most of them agree with it.
So why then the generally gloomy media reception when the professionals paid to understand economies and budgets broadly agree that the new treasurer's first budget was at least a solid credit, even if it wasn't a high distinction?
Treasurer Jim Chalmers says this is a budget of hard decisions. But there was one really hard decision he wasn't ready to make.
This could be one reason.
"This is not an easy budget to sum up," said independent economist Nicki Hutley.
"And that is a good thing, because it is working towards better economic, social and environmental outcomes, rather than three-word slogans."
Another is the relative lack of goodies for households and businesses, of the kind that many had become accustomed to over the past decade.
Most of the personal benefits in the budget were directed at groups of people who will hopefully deliver wider economic benefits, for example cheaper childcare, so more parents can work more hours, and fee-free TAFE places, so more Australians will become skilled workers.
We didn't get a renewed cut in the fuel excise, a federal energy bill rebate scheme to mirror the handouts offered by some states, or a commitment to continue small business instant tax write-offs.
"It may take a little time for Aussies to fully appreciate that the sugar hits of more recent budgets are a thing of the past, but this budget sets a clear line in the sand," observed Ms Hutley.
"We can't have Scandi-style social services based on a Cayman Islands tax system. Something's gotta give."
Since when has restraint ever been wildly popular? It's like being the designated driver on a winery tour or the toddler whose parent keeps you away from the cake at a birthday party.
If anything, most economists' main criticism of the budget is that it doesn't enforce enough restraint: while it's not making Australia's fiscal and economic challenges worse, it's not doing enough to fix them either.
"In no way is Australian fiscal policy acting to restrain the economy and help reign in inflation," argued Warren Hogan.
"They might not be making the RBA's job harder, but they certainly aren't providing a helping hand either."
The budget is in a structural deficit equal to about 2 per cent of Australia's annual economic output (GDP) for as far out as Treasury's estimates go.
In today's money that means a deficit of at least $40 billion if economic conditions are about average — much worse if we're in a downturn, and probably still no surplus even when we're in a boom.
Something has to change.
We have lived through an economic era largely characterised by kicking cans down roads.
Does Jim Chalmers have the power and the passion to get Australia's budget off a highway to hell?
Central banks and governments did it after the global financial crisis, where lower interest rates and more debt was the answer to the implosion of too many risky loans.
Having fooled themselves into thinking that worked, they doubled down for the pandemic, with even lower interest rates and more deficit-financed spending.
Finally, inflation is looming as the dead-end that stops these cans being kicked any further, although Mr Chalmers is yet to pick up the can to take it back from whence it came.
According to former Treasury official Stephen Anthony, he may not have much longer to do so.
"I think this next year is going to be make-or-break for our nation, with more problems stacked up than we've had since World War II," the managing director of Macroeconomics Advisory told the ABC on budget night.
"It was fiscal policy that caused today's inflation and it must play an active role in curtailing it.
"The treasurer shouldn't assume he has time to play with to fix the budget."
Come May, Mr Chalmers may once again find himself on a hiding to nothing, carrying the jerry can of tax increases or spending cuts that precious few governments have been willing to, or able to hold for long without it blowing up in their face.
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