The countdown is on – Treasurer Jim Chalmers will deliver the 2022-23 October Budget at 7:30pm next Tuesday 25 October. As always there is speculation in the media, plus Albo and Jimbo have been providing a few titbits to get us thinking.
Labor will talk about the deficit being worse than Scomo told us – and there will be an element of doom and gloom for years to come. Global growth forecasts will take a hit and Australia will be affected. We have some things going for our economy i.e., there is still demand for our exports, however, with other parts of the globe struggling and a war raging in the Ukraine we are in for a bumpy ride.
Inflation is rising and the Government needs to look at ways they can help to control it. I am sure they have kept a close eye on the UK and don’t wish to follow in the steps of the newly resigned, British Prime Minister Liz Truss’s and her party’s ‘flip flop’. It’s a fine line of reducing expenditure, taming capital infrastructure projects, and trying to help ‘the everyday person’ with the cost of living.
Here’s a few thoughts on what I think will be in the headlines in the budget.
Recommit to the tax cuts scheduled for 2026
Labor went to the last election promising there would be no change to the already legislated tax cuts (which Labor backed in 2018). The tax cuts are due to be rolled out in 2024 reducing the marginal tax paid on incomes between $45,000 and $200,000 to 30% (instead of the 32.5% now paid up to $120,000, 37% between $120,000 and $180,000, and 45% after that). There already seems to be a disconnect between Jimbo and Albo on these cuts with Albo reasserting his commitment. At this point it appears they will go ahead, however, if Jimbo prevails, we could be in for another temporary budget repair levy and if not now then maybe in May 2023!
Focus on childcare
Much of this has previously been announced with Labor keen to get more mum’s (and dad’s) back into the workforce. Last Saturday Labor announced plans for the Government funded paid parental leave to be extended to 26 weeks which can be shared between two parents, to be rolled out by 2026. There have been murmurs they are also looking to fast-track their election promise of subsidising childcare for [more] families. The policy would cost $5.4billion a year and assist more than 1.26 million families by increasing the maximum subsidy rate by up to 90 per cent for the first child in care for families earning under $530,000 a year. These are all good headline grabbing numbers but could some of the money be put to better use rather than paying for people’s childcare who earn over $530,000 a year?
There will be commentary around increasing immigration for skilled workers. Our borders were closed to the rest of the world whilst we battled Covid and immigration numbers are still not back to pre-pandemic levels. We expect Labor will release some initiatives to get more skilled workers coming to our shores to boost production and reduce wage growth pressures impacting inflation.
Labor have already announced an increase in Australia’s 2030 emissions reduction target under the Paris Agreement from the previous 26–28% cut below 2005 levels to 43% – a target which is now enshrined in the new Climate Change Bill passed in September.
Will the Albanese government look to introduce carbon tariffs as part of a suite of climate policies to help the global shift to net zero emissions by 2050? Whatever is proposed will need to tread a tightrope between the rising cost of living and inflationary pressures and environmental progress.
More spending in defence, aged care, health and the NDIS
Previously Labor has advised these areas will see spending increase – defence by 4.4%, aged care by 5%, health by 6.1% and the NDIS by 12.1%. Government spending has a direct impact on the economy and inflationary pressures with a balancing act required.
And here’s some commentary I’d like to see Jim talk about next Tuesday evening given its his first rodeo as Treasurer.
- A well thought out budget that solves the causes not just the symptoms of the cost-of-living increases. The cash is not infinite and a well thought out plan to help households is needed to get the most bang for his buck – a child care subsidy for people earnings over $500,000 verses energy prices v excise on fuel for households.
- More incentives for companies who are in the renewables space both in development and production – how can we fast track renewable energy whilst ensuring that it remains affordable for consumers?
- Simplification of the tax system across multiple levels with a view to alignment between Federal and State taxes. The ongoing tug of war for households dollars between Federal and State government is old fashioned and tiresome. A real overhaul of the system rules should be considered and then actually implemented. The first cab off the rank should be Payroll tax – a tax on jobs?
I’ll be watching next Tuesday night and will release the ESV White Paper next Wednesday morning explaining what the announcements mean to businesses and individuals. Let’s see what tricks Jim has to tame inflation and keep the voting public happy – I do expect they will make cuts to some of Scomo’s ‘pet projects’, as that’s just politics!