Budget 2023: Let the Responsible Economic and Strategic Mentoring Continue

The AIM Network

2 years ago

By Denis Bright

Supportive coverage by the Illawarra Mercury (1 May 2023) of the Federal Treasurer’s forthcoming budget preparations were already part of a groundswell of new support for the Albanese Government during the pre-budget period.

There is a strong consensus from commentators that Australia cannot afford another round of neoliberal policies. In difficult times, the budget responses have been carefully calibrated to halve the inflation rate in the forthcoming year while delivering relief to the most vulnerable through modest levels of rent assistance, affordable housing initiatives, improvements to the bulk-billing rate and protection against electricity and gas cost spirals.

Youthful treasurers like Dr. Jim Chalmers helped to revitalize the Labor Party in the past at a time when change in the direction of public policies was absolutely essential. Bill Hayden’s career as treasurer was cut-short by the dismissal of Gough Whitlam by Governor-General Kerr in November 1975. Paul Keating as Treasurer (1983-91) continued on as Prime Minister (1991-96). Labor’s unexpected victory at the 1993 elections offered a way out of the worst of the post-1945 recessions which brought double digit rates of both unemployment and interest rates.

Dr Chalmer’s career is in its ascendency. His electorate of Rankin includes large sections of Logan City. Dr Chalmer’s budget address commenced with an acknowledgment of the critical awareness of his electorate which he also carries into the corridors of the rich and famous like the G20 Summit in Washington on 12-13 April 2023 where commitment to neoliberal values still rides high amongst opinion leaders and mainstream media commentators (Treasurer’s Budget Address):

Speaker,

We acknowledge the Ngunnawal and Ngambri people, the Yagara and Yugambeh Country around Logan, and all the First Nations of Australia – their Elders, customs and traditions.

And we recognise the opportunity we have this year to move forward together, listening to each other, in a spirit of unity and respect.

After ten years in opposition, neoliberal shadows still lurk over budget processes which are controlled by strict protocols across key federal departments and even with strategic allies whose grim warnings feed onto the Office of National Assessments (ONA) and the various tiers of the Defence Department and its intel networks. The current budget shows that progressive is still possible in the short-term.

Through good economic management and a temporary improvement in trading relations with key trading partners in the Indo-Pacific Basin, a projected deficit of $56.5 billion for 2023-24 in the federal LNP’s budget has been transformed into a likely surplus of $4 billion.

These changes have been delivered without the austerity measures imposed by Joe Hockey’s 2014 budget after the election of Tony Abbott. Instead, Dr Chalmers has delivered a commitment to:

Provides cost‑of‑living relief that is responsible and affordable and prioritises those most in need.
Delivers historic investments in Medicare and the care economy – making it easier and cheaper for Australians to see their doctor.
Broadens opportunity by breaking down the barriers of disadvantage and exclusion.
Lays the foundations for growth by embracing clean energy, and investing in value‑adding industries, people, skills, technology and small business.
And strengthens the Budget – with a surplus forecast for this year, with less debt and smaller deficits compared with recent budgets.

For the first time there is a Women’s Budget Statement that is authorized by the Treasurer and Katy Gallagher as Minister for Finance, Women and the Public Service. Amongst the issues covered in this statement is the extent of the Gender Pay Gap.

Passage of the Voice Referendum should see an Indigenous Statement added to next year’s budget papers.

Addressing the need for structural changes should require more details of perceived threats to Australia’s international security. Fortunately, this is not a khaki defence spending budget as shown by the charts for comparative expenditure growth rates into the medium term from Budget Paper 1.

The real costs of the AUKUS submarine deals are deferred into the medium term with some items listed as Not for Publication (nfp) because these costs are not fully known. This is a sellers’ market for defence hardware. The scope for wriggle room by the Australian government in the event of a sudden cooling in international tensions is not fully revealed in Budget Paper 2:

Concerns from commentators about the potential inflationary impact of Dr. Chalmers $14.6 billion in modest relief to the most vulnerable Australians overlook the warmings in Budget Paper 1 on the open-ended costs of the future AUKUS deals.

Real structural changes in priorities will take time to evolve. Welcome advice can be expected from the Greens and other members of the cross-bench as well as from a whole network of community activists. This government can take advice from a wide variety of sources and may have to amend some proposals in the senate where the government lacks anything close to an absolute majority.

As mentioned in a previous article on the importance of international factors on our own economic future (AIM Network 3 May 2023), interest rate settings in Britain and the US have an important impact on economic projections in middle-sized economies like the Australian economy. The US Federal Reserve raised interest rates to their highest level since September 2007. US interest rates are a long way off the disastrous situation in the early 1980s as shown by the trendlines from Trading Economics.

Despite patches of volatility in US financial markets since May 2022, US share prices have benefited from higher interest rate regimes and continued financial exchanges with China in both trade and investment.

Net capital flows out of China have picked up again since mid-2022 as Chinese investors and government agencies take advantage of the new interest rate regimes overseas. While Australia is cautioned to avoid too much Chinese investment, commercial ties between the US and China have picked up under the Biden Administration as noted by the Office of the US Trade Representative even if the data offered on its current web site is more than a trifle out of date for a site which is the responsibility of the US President:

China is currently the largest US goods trading partner with $559.2 billion in total (two way) goods trade during 2020. Goods exports totalled $124.5 billion; goods imports totalled $434.7 billion. The U.S. goods trade deficit with China was $310.3 billion in 2020.
Trade in services with China (exports and imports) totalled an estimated $56.0 billion in 2020. Services exports were $40.4 billion; services imports were $15.6 billion. The U.S. services trade surplus with China was $24.8 billion in 2020.
According to the Department of Commerce, U.S. exports of goods and services to China supported an estimated 758,000 jobs in 2019 (latest data available) (475,000 supported by goods exports and 283,000 supported by services exports).
U.S. foreign direct investment (FDI) in China (stock) was $123.9 billion in 2020, a 9.4 percent increase from 2019. U.S. direct investment in China is led by manufacturing, wholesale trade, and finance and insurance.
China’s FDI in the United States (stock) was $38.0 billion in 2020, down 4.2 percent from 2019. China’s reported direct investment in the U.S. is led by wholesale trade, manufacturing, and information services.
Sales of services in China by majority U.S.-owned affiliates were $59.6 billion in 2018 (latest data available), while sales of services in the United States by majority China-owned firms were $20.6 billion.

Those prized structural changes needed to implement Labor values require a long-term Labor Government with a greater commitment to Australian sovereignty, economic diversification and self-interested economic diplomacy than the now disgraced decade of federal LNP administration. A soft-landing from the US economic downturn and the commercial tensions with China will be a good sign for the Australian economy.

Using the exemplar of the US Trade Representative I would say what’s good for the goose is appropriate for the Australian middle-sized economic gander. More co-dependency between Australia and the wider Indo-Pacific Region including Taiwan might give all participants a softer landing in the forthcoming global slowdown whose economic costs can still be minimized by a good dose of pragmatism.

This responsible pragmatism by Dr Jim Chalmers is surely based on a thorough assessment of the mind-sets of high-profile leaders and their loyal policy staffers at events like the G20 Summit in Washington on 12-13 April 2023 which was never really A Long-way from Logan City as mentioned by one commentator on my previous article about the international pressures on Australian interest rates.

While negotiations with the crossbench and leftist activists will always contribute to the final outcomes from the current budget, the current fetish for minor political parties should not detract from the prize of majority government at least in the House of Representative.

May the responsible mentoring and reform of our essentially neoliberal economy continue at a pace which is tolerable to a still fairly conservative electorate in which our media gurus largely ignore the influence of the global economy on medium term outcomes for Australia into the 2030s.

Until ChatGPT and Bard extend their cut-off dates for media monitoring, our collective future will always be uncertain. I do see some hope in the improved commercial and investment relationships between the Anglo-American financial sectors and the world’s second largest economy with its close commercial ties across the Taiwan Strait. Updates on transits by RAN vessels through the Taiwan Straits are not readily available. A tourist ferry between Mainland China and Kinmen Island in Taiwan is a good substitute for such military jaunts. Crossing the divide is as close as a routine trip from the Port of Townsville to Magnetic Island but passports are still required to cross this artificial divide in either direction.

Hopefully, Dr Jim Chalmers at 45 years of age will be around for a long time to deliver sustainable outcomes for humanity where large sections of the population are disadvantaged at home and abroad as a trillion dollars a year is being spent on defence and intel initiatives in those far-off Anglo-American heartlands in Britain and the USA.

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(Stockholm, 24 April 2023) Total global military expenditure increased by 3.7 per cent in real terms in 2022, to reach a new high of $US 2240 billion ($US 2.24 trillion). Military expenditure in Europe saw its steepest year-on-year increase in at least 30 years. The three largest spenders in 2022 – the United States, China and Russia – accounted for 56 per cent of the world total, according to new data on global military spending published today by the Stockholm International Peace Research Institute (SIPRI).

The real-terms increase in world military spending in 2022 was slowed by the effects of inflation, which in many countries soared to levels not seen for decades. In nominal terms (i.e. in current prices without adjusting for inflation), the global total increased by 6.5 per cent.
India’s military spending of $81.4 billion was the fourth highest in the world. It was 6.0 per cent more than in 2021.
In 2022 military spending by Saudi Arabia, the fifth biggest military spender, rose by 16 per cent to reach an estimated $75.0 billion, its first increase since 2018.
Nigeria’s military spending fell by 38 per cent to $3.1 billion, after a 56 per cent increase in spending in 2021.
Military spending by NATO members totalled $1232 billion in 2022, which was 0.9 per cent higher than in 2021.
The United Kingdom had the highest military spending in Central and Western Europe at $68.5 billion, of which an estimated $2.5 billion (3.6 per cent) was financial military aid to Ukraine.
In 2022 Türkiye’s military spending fell for the third year in a row, reaching $10.6 billion – a decrease of 26 per cent from 2021.
Ethiopia’s military spending rose by 88 per cent in 2022, to reach $1.0 billion. The increase coincided with a renewed government offensive against the Tigray People’s Liberation Front in the north of the country.

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Denis Bright (pictured) is a financial member of the Media, Entertainment and Arts Alliance (MEAA). Denis is committed to consensus-building in these difficult times. Your feedback from readers advances the cause of citizens’ journalism. Full names are not required when making comments. However, a valid email must be submitted if you decide to hit the Replies Button.