Lowering tax burden looks overly ambitious, leading economist says
The budget confirmed fiscal challenges into the future and forecasts could prove ambitious, according to Prof Richard Holden, chief economist of Chartered Accountants ANZ, Australian Associated Press reports.
The treasury has forecast that tax as a proportion of GDP would come down to 23.1%, well below the Coalition’s proposed 23.9% cap.
But this is dependent on economic growth forecasts which Prof Holden thinks are overly ambitious.
In the long run, the only way to deal with a deficit is by increasing taxes or reducing spending, so this is the key figure that will drive major policy decisions, whoever is in government after the election.
Economic growth is anticipated to grow at 1.5% in 2024/25, 2.25% in 2025/26 and 2.5% in 2026/27 – speeding up while the economies of major trading partners China and the US slow down.
Prof Holden said:
This is arguably rather bullish in a world marked by global uncertainty with US President Donald Trump set to announce a new wave of tariffs on April 2, on top of the existing disruptions to global supply chains that have already occurred, and the substantial uncertainty about European security arrangements.
Key events
Lane also asks Dutton about the leaking coming out of his party room – which you can read more about from my colleague Henry Belot here:
Does Dutton have his house in order? He says:
We have a sense of unity, as people have seen over the course over the last two and a half years, and not every day is going to be a perfect day in opposition, I can promise you. But what we’ve done is held the government to account.
Opposition leader Peter Dutton is now on ABC AM, we know the opposition won’t support the top up tax cuts, which the Coalition has called a “cruel hoax” and a measure for “the next five weeks, not five years”.
Dutton repeats those same lines.
He also won’t give away whether the Coalition will offer an alternative tax package (as the Liberals have continuously said tax would be lower under them). He says more will be revealed during his budget reply tomorrow night.
The mandate I see for the next election is around making sure that we can provide support to families in a cost of living crisis that Labor’s created. And that means fixing our energy system. It means providing hope for young Australians in terms of home ownership. So that means cutting back on the massive, big Australia policy that has been implemented by stealth under the Albanese government.
The Coalition has kept bringing migration numbers into the debate – that they’re having an impact on the cost of living and housing (but experts have previously said migration doesn’t have a significant impact, and can pull more money out of the economy).
It’s an area they see as a policy strength they have over Labor – and you can expect to see more of that debate during the election campaign.
PM says budget strengthens Australia in face of global turbulence
Asked whether there’s enough reserve in the budget to weather another global economic storm – for example, if the US tariffs wreak havoc in global markets – Albanese reiterates the point that Labor has set up the budget to reduce deficits and improve the bottom line.
But what about if Trump goes further on tariffs? Lane asks whether Albanese would call out the US as a “bully”. He replies:
What we’ll always do is stand up for Australia’s national interest. That is what we will do. That’s what we’ve done in advocating for Australia’s national interest…
We’re making sure as well that we set Australia up by not being reliant on any one country, by diversifying our trade relationships and by improving those relationships in our region and around the world.
Albanese says Taylor tried to ‘hide’ energy price rise
The PM is now on ABC AM, he also makes the point that the top-up tax cuts have come after wages have grown, and inflation is dropping – so living standards are starting to come back.
Sabra Lane tests Anthony Albanese on his promise of a $275 drop in energy prices before the last election (remember that?).
Lane asks if he’s learned anything from making a promise that can’t be kept:
Well, we intervened in the [energy] market. One of the things that we did before the last election was, of course, to say that renewables were the cheapest form of new energy … Angus Taylor introduced a special provision in the parliament to hide the fact that there was a 20% increase in prices due just after the election.
Treasurer says tax cuts ‘modest but meaningful’
Jim Chalmers started on ABC News Breakfast, defending the $17.1bn spend on the tax cut “top up” as we stare down a decade worth of deficits.
The government has tried to emphasise the point that things are looking up, particularly compared with the economic forecasts before the last election in 2022.
They’ve also taken out almost $95bn in spending, a lot of which they say they’ve banked as savings.
Chalmers lines are fairly similar this morning as they were last night – that it’s in line with inflation coming down, and gives people the extra support they need.
These are modest in isolation, but meaningful when you combine them with the other tax cuts we’re providing, as well as all of the other cost of living relief that we’re providing … What Angus Taylor’s brain explosion about opposing these tax cuts really means is the election is going to be a pretty clear choice.
Krishani Dhanji
Good morning, Krishani Dhanji here with you for the budget wash-up today.
The tl;dr of last night was tax cuts for everyone from mid next year, and Labor promising things are looking better than expected – fuelling the election battleground on tax and cost of living.
The PM and treasurer are doing the media rounds this morning spruiking their numbers, which they say are sustainable and responsible.
You’ll also see plenty of the opposition around this morning trying to poke holes in it (and they already said last night they wouldn’t be supporting Labor’s tax cut “top up”).
So buckle up, it’s going to be a big one!
Lowering tax burden looks overly ambitious, leading economist says
The budget confirmed fiscal challenges into the future and forecasts could prove ambitious, according to Prof Richard Holden, chief economist of Chartered Accountants ANZ, Australian Associated Press reports.
The treasury has forecast that tax as a proportion of GDP would come down to 23.1%, well below the Coalition’s proposed 23.9% cap.
But this is dependent on economic growth forecasts which Prof Holden thinks are overly ambitious.
In the long run, the only way to deal with a deficit is by increasing taxes or reducing spending, so this is the key figure that will drive major policy decisions, whoever is in government after the election.
Economic growth is anticipated to grow at 1.5% in 2024/25, 2.25% in 2025/26 and 2.5% in 2026/27 – speeding up while the economies of major trading partners China and the US slow down.
Prof Holden said:
This is arguably rather bullish in a world marked by global uncertainty with US President Donald Trump set to announce a new wave of tariffs on April 2, on top of the existing disruptions to global supply chains that have already occurred, and the substantial uncertainty about European security arrangements.
As mentioned at the top, Basil Zemplias has taken over as WA Liberaal after another dismal showing in the state elections.
The man who has stood down as mayor of Perth to take charge of the state party has some obvious credentials as a well-known former athlete and a regular on the small screen out west.
But he has stumbled over one of two policies since his time in the public eye as mayor – inclusing comments about women’s shelters that showed him as out of touch.
Our correspondent in Western Australia, Narelle Towie, looks at his rise to power and the tough task ahead:
If you need more of a bite-sized take on the budget, Matilda Boseley has produced this excellent video explainer boiling it all down to two main points: “please vote Labor” and “things are looking OK for Australia”.
Our political reporter, Josh Butler, explores the political sleight of hand employed by Jim Chalmers to wrongfoot his opponents and pave the way for a positive election message.
The measures, Josh argues, leave Angus Taylor and his boss, Peter Dutton, “in a pickle” meaning that they might have to campaign with a correspondingly negative message.
Josh writes:
Do they go to an election promising to unwind or oppose Labor’s new tax cuts, as they initially positioned themselves on Labor’s reimagined stage-three changes? Or do they again, as they’ve done with the bulk-billing policy and cheaper medicines, immediately match the government’s pledge – then have to find another $17bn of headroom in their own economic plan, already groaning under the weight of needing to finance seven nuclear power stations?
Read his whole article here:
The political purpose of the budget couldn’t have been better executed, according to our economics columnist Greg Jericho, who uses seven charts to show how Jim Chalmers has outflanked Angus Taylor with his cunning plan to ensure the “very vast majority of people are paying less tax”.
Here’s one on the tax cuts:
He adds that the big shock for him was not just the tax cuts “but that the budget deficit is not all that changed”. He says that although we’ll see a lot of commentary about deficits as far as the eye can see, he doesn’t think they are that important:
The budget has been in deficit 33 of the past 50 years – or two-thirds of the time since Gough Whitlam lost office. And yet in that time our standard of living has greatly improved and we still exist as a sovereign nation.
Here’s Greg’s whole piece:
Welcome
Martin Farrer
Good morning and welcome to our live news blog. I’m Martin Farrer with the reaction to last night’s budget and all the other political news this morning before Krishani Dhanji takes over.
It’s not exactly an original strategy, but the treasurer’s unveiling of a classic pre-election tax-cutting budget nevertheless caught many by surprise – much to the glee of the government benches and the consternation of the Coalition’s ranks. We have reports, analysis and comment on Jim Chalmers’s offer and how it might impact Australians and the forthcoming federal election. There’s also lots of reaction including from a prominent economist who thinks the budget growth forecasts are too ambitious.
There was also a fair bit of election-related news yesterday with the Coalition attacking on Labor’s “poorly designed” vehicle emission standard and signalling that they might be prepared to make Australia’s love of petrol-guzzling cars an election issue. And in a sign that the Coalition is concerned about its messaging going into the campaign, Peter Dutton has told the party room to stop leaking internal policy debates and frustrations to the media, warning it could cost them the election.
It was also a big day for politics out west with the WA Liberals appointing Basil Zempilas as their new leader. The task facing the former footballer and television personality will be to revive the party’s fortunes after three successive election defeats to Labor. More coming up.