PETER VAN ONSELEN: Jim Chalmers insists Budget 2024 is all about reducing the cost of living for struggling Australians – but will it be enough?

Treasurer Jim Chalmers will deliver his third budget on Tuesday night.

The big question: Is it an election budget? Chalmers is adamant that this is not the case.

‘Oh no. What we’ve tried to do here is to be really attentive to the economic cycle, and that means a really responsible budget, a pretty restrained budget. But a budget that is focused largely on life pressures that people feel right,” Chalmers told me.

With elections due before the middle of next year and possibly before the end of this year, the 2024 budget could be the last to be tabled before voters head to the polls.

So what does Chalmer think Australians should watch out for in the Budget on Tuesday night?

Jim Chalmers (pictured) knows inflation is too high but vows to get it back to where it should be in the 2-3 percent band

Anthony Albanese (pictured right) and Jim Chalmers (pictured left) hope Budget 2024 will set up a second term

Anthony Albanese (pictured right) and Jim Chalmers (pictured left) hope Budget 2024 will set up a second term

«The cornerstone of the entire budget is a tax cut for every taxpayer. Average savings of about $36 a week to help with living expenses,” Chalmers said.

These are the changes Labor has made in the coalition’s third phase of tax cuts, characterized as a broken election promise after Anthony Albanese promised the statutory tax cuts would be delivered as promised.

However, Chalmers and Albanese did not excuse this commitment. Chalmers made it clear he had changed the proposed cuts to favor younger voters who he said had been «losing out for too long».

“People can expect to see it (the newly proposed income tax cut) in their bank accounts from July. We think it’s really important. It is the largest part of the cost of living in the budget, but not the only part,» Chalmers emphasized.

Another form of help included in the 2024 budget is a reduction in the indexation of Higher Education Contributions (HEC), retroactive to last year.

«It’s about students taking it last year when inflation was particularly high in the way their student debt was calculated,» Chalmers said.

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But what about the millions of taxpayers subsidizing this change who either didn’t go to college or have already paid off their debt without help? There is rage among such groups.

‘Oh, I understand that. It is very rare that a decision taken by the government, even a good one, gets unanimous support… but that is not the only thing we do in the budget,” he said.

Other budget measures flagged include tipping more money toward housing as part of funding deals with states.

“The budget will build quite substantially on the $25 billion we are already investing in building more homes for Australians. We know we don’t have enough houses, so rents are higher than we would like. That’s why it’s hard for people to get a foothold in the market,” said the treasurer.

Chalmers described the election pledge to build 1.2 million new homes by 2029 as «ambitious but achievable», but in a sign he acknowledged they might not get there, he also noted «it will be difficult but not impossible».

Will the 2024 budget adequately address rising spending and the structural deficit?  (Treasurer Jim Chalmers pictured)

Will the 2024 budget adequately address rising spending and the structural deficit? (Treasurer Jim Chalmers pictured)

Currently, new home building is well below where it needs to be to meet the promised target. To support this, Chalmers said building the construction workforce is extremely important.

«That’s why we’ve announced these 20,000 free opportunities for people who want to work in construction,» he said.

The budget is delivered in the context of too much inflation and recent reports have suggested that there is even a chance that interest rates will go up, not down. At least previous expectations that they would fall this year now appear less likely.

How does the Treasurer see the challenge of reducing inflation?

«It’s really a defining focus of the budget, to provide as much assistance as possible,» he said.

But that help – in the form of more spending – could backfire and fuel inflation. Chalmers is well aware of the balance.

“That’s really the thing that, frankly, we spent the most time on when we were putting together this budget.

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«So balance is really the word that defines this budget,» Chalmers said.

Jim Chalmers (left) sat down with his department secretary to draw up a budget

Jim Chalmers (left) sat down with his department secretary to draw up a budget

Australia’s living standards have seen their biggest drop in more than half a century. Chalmers wants to share the blame for this reality with the coalition.

«We were very aware when we came into office that one of the big issues was that people’s wages were going down,» Chalmers said.

“It was a combination of high and rising inflation in the first half of 2022 (when the Coalition was in power) combined with a decade of stagnant wages (during most of which the Coalition was in power).

“And so we worked very hard to reverse that.

Chalmers cited rising real wages in some parts of the economy as something he’s proud of in his first two years on the job.

Chalmers, asked for a simple way to judge whether Budget 2024 is a success or a failure by the next election – if rates don’t go up, you’re right, if they do, then you’ve been spending badly, Chalmers binary rejects the choice.

«I think that’s an oversimplification. My job is to try to overcome this inflationary challenge and help people who are doing it the hard way and invest in the future.”

Former finance minister Ken Henry, with whom Chalmers worked when he was on the staff of then-Treasurer Wayne Swan, described the booming business conditions enjoyed by Chalmers and other treasurers as «dumb luck» saving Australia from political decision-making.

Asked if he agrees that dumb luck got him where he is, Chalmers pauses and bristles slightly before saying: ‘Err, no, you won’t hear me say that’, adding: ‘but the question it has some really important parts’.

«Above all, we appreciate the important role the resource sector plays in our economy… we can’t say it enough».

Labor is desperate to retain the WA seats it won at the last election.

Treasurer Jim Chalmers (pictured) with his family as he plans to release the family budget in 2024

Treasurer Jim Chalmers (pictured) with his family as he plans to release the family budget in 2024

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The treasurer also highlighted the strength of the labor market: «780,000 new jobs created under the Albanian government and wages moving again».

Chalmers noted that the «revenue increase» in the budget was not largely a result of «labour market strength».

But it depends on what the government does with the increase in revenue that the terms of trade have helped.

Chalmers is adamant that “over the course of our first two years in office, we have overwhelmingly nailed it. Most of it was spent by our predecessors. We saved most of it.

«That makes a big difference because it means we can reduce the debt and pay less interest on it,» he said.

But while the 2024 budget is expected to show a surplus in this and the next financial year, it is likely to bring deficit forecasts in subsequent years. And many economists have expressed concern about the underlying structural deficit — when unexpectedly growing sources of revenue are removed from the budget.

With more than one trillion dollars of accumulated government debt and higher than expected interest rates, there is an argument that Labor should be spending even less than it claims.

That’s the direction Opposition Leader Peter Dutton looks set to take with his budget on Thursday night. Combining the challenge that spending creates for rising debt into the future with a stimulative impact on inflation.

Chalmers’ budget forecasts suggest it will get inflation back into the 2-3 percent range sooner than most economists predict. Also earlier than the Reserve Bank of Australia predicted.

«Inflation is piling up from 2022,» Chalmers said.

‘What we’re trying to do is design our cost of living assistance so that we can take a little bit out of this inflation that all your readers are suffering.’

That sounds like the key performance indicator the Treasurer and the Labor government want to be judged on at the next election. It’s a risky venture, but from the sounds of it, they’re ready for a political fight.

What do you think?

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