Budget Futures in a Time of Global Economic Nationalism

The AIM Network

8 months ago

By Denis Bright

Jim Chalmer’s Budget received a good reception. Commentators identified with the government’s cost-of-living commitments but wanted more targeting of this assistance to cope with the growing income and social divides across Australia.

In this context, the LNP’s calls for spending restraint have little support in the wider community. LNP supporters should decide which cost-of-living initiatives should be given the chop.

Progressive crossbench leaders might work with the government on fine-tuning the budget initiatives without hampering a commitment to anti-inflationary measures.

As the Senate under Section 53 lacks constitutional power to amendment budget and money bills, legislative changes must come from the lower house on these issues. Here the Albanese government has the numbers to maintain the existing budget parameters. Government members in the lower house would be sympathetic towards more relief for jobseekers. Negotiations over some tinkering with minor budget parameters can still be achieved with the co-operation of progressive crossbench members in the House of Representatives.

The rental assistance measures offered do not go far enough to address the income divide with extra battalions of 80,000 unemployed people in the next twelve months as unemployment rises to 4.5 per cent of the workforce. The political world would not collapse if support for job seekers came in the form of training programmes and targeted relief for job-seeker allowances. Budget deficits will return in 2024-25 the attainment of twin surpluses. Adding a couple of billion in targeted spending initiatives for the retraining of unemployed Australians will not challenge the overall budget parameters and could be offset by better targeting of cost-of-living relief measures. Complaining about those red signals of the Underlying Cash Balance Graphs since 1990 is a bit far-fetched when they also occurred under the federal LNP during the post-2013 era.

Revenue might come from targeting cost-of-living support without the need for longer term measures like a sugar tax on beverages which contribute to diabetes.

These budgetary negatives have been balanced by an extraordinary commitment to home care packages for elderly patients and relief for the cost of PBS scripts. The effects of more commitment to mental health and relief for job seekers need not add to inflationary pressures if balanced by revenue initiatives. All this assistance to ageing baby-boomers has not translated to a firmer primary vote for Labor in previous elections.

Nine News Graphics shows the extent of commitment to health and welfare in the current budget. More commitment to the productivity levels of spending on infrastructure as well as grants to the states and territories could be of a higher profile in media releases from the Albanese Government.

Expenditure on rearmament and AUKUS will of course show up in future budgets. This spending has been contained at just less than $50 billion in the current budget.

While external factors on the current budget targets from global economic trends are currently favourable, the current budget parameters retain a high degree of flexibility. ABC’s financial analyst Alan Kohler has a positive assessment of this situation which may not extend into 2025.

Higher interest rate regimes in both Britain and the US do not assist Australia in its own fight against inflationary pressures. Any breakthroughs in Chinese investment and trade with Australia during the visit of Chinese Premier Li Qiang in June 2024 might improve our economic flexibility. Meanwhile, the Biden Administration has moved into economic nationalist mode to enhance its re-election prospects This is hardly a sign of confidence from the economy which generates financial and strategic leadership worldwide (Yahoo Finance 14 May 2024):

US Re-Election Strategies Triumph Over More Logical Global Economics:

Goodwill towards tinkering with the budget estimates from progressive sections of the crossbench rekindles the progressive alliances which assisted in the election of the Albanese Government in 2022.

After a GDP growth of just 1.75 per cent in 2023-24, these positive external factors can offer temporary optimism in the forthcoming election season and marginalize the rearguard campaign from Peter Dutton against all things progressive. The global economy has moved on to a new era that is fueled by economic nationalism and canny economic diplomacy.

Treasurer Jim Chalmers can interact productively with the new world order and a little progressive tinkering from the crossbench to his budget estimates. That is why Treasury is ahead of the RBA in its economic assessments about the possibility of an early reduction in interest rates while both the US and Britain cling to high interest rate regimes to maintain the value of their currencies and to maintain capital flows. It is the RBA which must respond critically to the prospects emanating from Treasury and broader trends in the Australian and global economies.

Jim Chalmers would know that Australia can afford to be less dependent on our global strategic leaders to reclaim a more respectable degree of national sovereignty.

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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.