Labor has unveiled an ambitious plan to build one million homes but warned families to brace for soaring cost-of-living expenses, including an expected hike in energy prices of 56 percent.
Announcing Labor’s first Budget in nine years, Treasurer Jim Chalmers focused on responding to overwhelming economic pressures – including the spectre of a global recession – as he sought to reposition Labor’s economic credentials.
Dr Chalmers also sent a strong message to the electorate: they can trust the Government to make the difficult but necessary decisions to steer Australia through these challenges.
With any stimulation of the economy likely to exacerbate inflation and put further pressure on interest rates, Dr Chalmers focused on framing the challenge of anticipated tough measures in next May’s Budget.
He has flagged tighter spending and possible new taxes to restore the Budget.
Addressing Federal Parliament, Dr Chalmers warned the National Disability Insurance Scheme (NDIS) could outstrip the aged pension as the most expensive Commonwealth outlay in future years.
Against a backdrop of worsening global conditions, economic growth is forecast to fall to just 1.5 per cent in 2023/24 while inflation will reach a peak of 8 percent.
The Budget also confirmed plans to clawback more than $20 billion in measures – many of them focused on the regions – announced by the former Coalition Government.
The big surprise in the Budget was a National Housing Accord which the Treasurer estimates will build one million new homes over five years from 2024. The Government will stump up $350 million to kick-start the accord which will heavily rely on the private sector – and industry superannuation funds – to underwrite the housing roll-out.
The measure will be popular with younger people who have been priced out of the housing market in recent years.
“The ambition of the Accord is big and it’s bold,” Dr Chalmers told Parliament which, was devoid of business executives who for the first time, were attending Budget fundraising events offsite rather than on the Hill.
As he began the task of selling his first Budget, Dr Chalmers stressed the blow out in the cost of the National Disability Insurance Scheme which is now forecast to cost $166 billion over four years.
“The hard yards are to come,” Dr Chalmers said, as he began the task of softening up the electorate for future tough reforms.
While the economy will grow by 3.25 per cent this financial year, the Treasurer noted growth will fall to just 1.5 per cent in 2023-24 — a whole percentage point lower than the Treasury forecast just seven months ago.
Inflation will peak at almost 8 percent, before dropping to 3.5 percent and settling in the RBA’s target range in 2024-25. Unemployment is expected to stay low.
The Budget includes several tax reform measures for multinationals with the Budget forecasting it will raise an additional $4.7 billion over the forward estimates.
The Treasurer also announced a crackdown on a tax loophole used by some of Australia’s largest companies, including the major banks. The Government will shut-down off-market share buybacks to stop the ‘streaming’ of franked dividends to shareholders under a measure estimated to raise $550 million.
The Budget backs in the outcomes of last month’s Jobs and Skills Summit. This includes investments in additional university, TAFE and community-based vocational education places.
Key election measures to provide additional childcare places and reduce the cost of prescription medicines were also confirmed.
The Coalition launched an immediate attack on the Budget. Shadow Treasurer Angus Taylor said: “Just before the election, the Prime Minister told Australians that they ‘will be better off under a Labor government.’ In fact, by Christmas, the typical Australian family will be at least $2,000 worse off.”
Business offered a mixed reaction. The Business Council of Australia said the Budget “steadies the ship and sets the groundwork for reform to drive economic growth in the May Budget.”
The AI Group was less effusive. Its Chief Executive Innes Willox said the Budget “risks tinkering at the edges of Australia’s structural economic challenges at a time when the domestic and global economies are under significant stress.”
Steve Lewis, Senior Advisor, SEC Newgate Communications – [email protected]
Claire Bremner, Partner, SEC Newgate Communications – [email protected]
Sara Hourigan, Partner, SEC Newgate Communications – [email protected]