Politics

A budget with all the Australian federal election trimmings


And both electorates – promised a combined six railway station car parks at the last election – also got extra spending on infrastructure as part of Frydenberg’s fourth budget.

In terms of surgical electoral strikes, the combination of cost of living relief and infrastructure aimed at Lindsay and La Trobe would be the envy of the Australian Defence Force.

The broader budget itself is Josh Frydenberg and Scott Morrison’s “shock and awe” effort to drag the Coalition – well behind in all published opinion polls – to a fourth term of office.

Frydenberg was a little too upfront about his aims in the traditional post-budget address to the nation on Wednesday afternoon.

“My focus is on winning the election, explaining to the Australian people the granular detail in this budget,” he told the National Press Club.

Not that it was difficult to miss. Money is going out the door immediately while long-term commitments – such as around defence and aged care – remain unfunded.

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Outside those areas requiring long-term solutions, the budget also creates short-term headaches.

The fuel excise cut started immediately. But on September 28, it will end no matter the state of the global oil market. And, in a surprise to most, petrol won’t jump up by 22.1 cents a litre. It will be a little bit more as the usual six-monthly increase in excise – due on August 1 – means the increase will be closer to 23 cents.

That’s an extra $700 taken from the pockets of the Lindsay and La Trobe voters.

The low- and middle-income tax offset ends with your next tax return.

As modelling by the Bankwest Curtin Economics Centre, exclusively carried out by for The Sydney Morning Herald and The Age reveals, the end of the offset is going to create problems for millions of people next year. And create political headaches for whichever party is in office.

The analysis, which pulls together the impact on a person’s net income from the one-off increase in the tax offset, the $250 cost-of-living supplement to JobSeeker recipients, the Medicare levy and the low-income tax offset, shows someone on a $75,000 gross income will ultimately take home $60,158 thanks to the budget’s measures. Without the budget measure, they would have taken home $59,738.

But when the lamington ends with the 2022-23 financial year, net income for this person falls to $58,658. It’s a $1500 tax increase.

The government’s third tranche of tax cuts, first announced in 2018 and which kick in from 2024-25, leave the person on $75,000 with a take-home pay of $59,408. In other words, they are $330 a year worse off than before this year’s budget.

At $90,000, net incomes fall from $69,983 to $68,483 after the end of the low and middle income boost and edges up to $69,608 in 2024-25 thanks to the third trance tax cuts. They are just $50 a year better off than where they stand right now.

There are also anomalies caused by using the tax system to deliver this sort of relief.

The Reserve Bank board will meet just days before the May election.

The Reserve Bank board will meet just days before the May election.Credit:Liam Williamson

A couple where both earn $90,000 a year will get an extra $840 in relief thanks to the super-sized lamington. A single-earner couple where one person is on $90,000 but the other is on JobSeeker ($17,189) will get $670 in relief.

Once the offset ends, of course, the dual-income couple of $90,000 each will feel a $3000 increase in their tax liability. The couple with the single-income earner and JobSeeker partner will be $1500 worse off.

The excise cut, and the low- and middle-income tax offset, have already been labelled fiscal time bombs for whichever party wins the election.

The first is the September 28 excise increase and the next hits the May budget in 2022 when a final decision has to be made on continuing the low- and middle-income tax offset or ending it for good.

The other time bomb is already ticking in Martin Place, Sydney. The home of the Reserve Bank.

It meets next week with no expectations it will lift interest rates which sit at a record low 0.1 per cent. The Reserve Bank’s May meeting, which will come after the release of the key March quarter consumer price index report, should be live for a rate change.

That report will clearly show a lift in inflation. Some economists believe inflation – which the RBA is supposed to keep between 2 and 3 per cent – is on its way to 5 per cent and beyond.

Data from the bureau of statistics this week showed two in five businesses expect to lift their prices by “more than usual” over the next three months. The average cost of new approved houses has climbed by more than 22 per cent over the past 12 months.

But the RBA is unlikely to move, especially during an election campaign dominated by cost-of-living issues. In 2019, it held fire but three days after polling day announced plans to start cutting interest rates so as to get the economy growing fast enough to bring down unemployment and drive up wages.

Anthony Albanese points to a member of the parliamentary gallery after his budget-in-reply speech.

Anthony Albanese points to a member of the parliamentary gallery after his budget-in-reply speech.Credit:Alex Ellinghausen

Now, it has to start taking away the stimulus provided by ultra-low interest rates to prevent inflation from becoming entrenched and making things even more difficult for businesses and employees. The budget pumps about $13 billion into the economy, right at the point inflation should be peaking.

It’s been almost 12 years since the Reserve Bank lifted official interest rates. No matter the economic imperative for moving, there will be a political price to pay.

That’s the economic backdrop to a political fight that is being engaged across the country.

On Thursday, the Prime Minister was telling Tasmanian voters – where there are up to three seats at play – how he understood their financial pain.

“I’m always listening, and we’ve been listening hard to Australian families and businesses who are really struggling with those cost of living pressures,” Scott Morrison told Tasmanian radio.

Anthony Albanese was on the streets of Parramatta in Sydney, with newly installed Labor candidate Andrew Charlton, talking up his five-pronged policy announcement on aged care made during his budget-in-reply speech.

While Morrison said he was listening to cost-of-living concerns, Albanese was arguing the government was wasting money by not calling the election.

“Call the election, let the Australian people decide. This business of not calling the election, so that he can use taxpayers’ money for ads is just yet the latest example of a Prime Minister who thinks that taxpayers’ money is the same as Liberal Party money,” he said.

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The budget itself is ultimately about money. Josh Frydenberg outlined a plan to raise about $547 billion in taxes while spending more than $625 billion, leaving a deficit of $78 billion. Since going close to balance in 2019, the Coalition has overseen the three largest deficits on record with no sign of an end to the red ink this decade.

The tension between the budget and getting re-elected was obvious in the cost-of-living handouts promised by Frydenberg.

But the budget also contained more than the normal number of fiscal fudges that could prove problematic in coming years.

The ABC’s Michael Janda noted that the term “funding for this measure has already been provided for” appeared 51 times in the section of the budget papers which contain all individual measures committed to by the government.

For instance, the $1 billion promised over nine years for the Great Barrier Reef by Scott Morrison earlier in the year only got $12.4 million in Tuesday’s budget. The “partial funding” clause is attached with no evidence of how or when the outstanding $987.6 million will be provided.

Another issue is the number of programs that have been allocated funding for just one or two years.

Shadow finance minister Katy Gallagher noted that there seems to have been an explosion in these with no rhyme or reason for only short-term funding.

The Life Checks program, which aims to help men aged between 45 and 65 live longer and better, got $2 million to continue through 2022-23. It’s unlikely the need to keep this cohort healthy will end in the 2023-24 budget.

Almost $28 million was allocated for a single year to “maintain timely environmental assessments and approvals” under the Environment Protection and Biodiversity Conservation Act. Again, unless the next government is aiming to stop timely approvals under the Act, this funding is likely to be extended. Just not in this pre-election budget.

All up, more than $1.7 billion in spending was allocated for just one or two years. Some of the programs only need to go for that one or two years, but there are clearly many that will have to be extended at a cost to taxpayers.

In a budget fudge, only $12 million of the $1 billion promised to help protect the Great Barrier Reef was revealed on Tuesday night.

In a budget fudge, only $12 million of the $1 billion promised to help protect the Great Barrier Reef was revealed on Tuesday night.Credit:Great Barrier Reef Marine Park Authority.

The budget, and Albanese’s reply to it, were the last big set pieces before Morrison sets the date for the federal election that will be held on either May 14 or 21.

It will be almost three years exactly to the day when Morrison declared he had always believed in miracles after defeating the Bill Shorten-led Labor Party.

The then still relatively unknown Prime Minister had gone to the voters with a back pocket full of budget surpluses while promising Australians, “quietly going about their lives”, that he would help them realise their “simple, honest and decent aspirations”.

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“An Australia where, if you have a go, you get a go,” he said.

Three years on, with the largest budget deficits on record and an all-time high mountain of debt, a battered and bruised PM faces up against an Opposition Leader who has deliberately kept his policy agenda narrow while focusing on his opponent’s shortcomings.

His promise, made this week, is an agenda that is not radical.

“My team and I are promising renewal, not revolution. A renewal of the best of Australia’s values: fairness, decency, supporting aspiration, looking out for each other, rewarding hard work,” he said.

Three years ago, the voters in Lindsay and La Trobe backed Morrison’s agenda.

Now they have to decide whether he deserves another three years.

Jacqueline Maley cuts through the noise of the federal election campaign with news, views and expert analysis. Sign up to our Australia Votes 2022 newsletter here.



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