- Budget balancing exercise: spend and NOT fuel inflation
- Albo’s future could depend on how this budget is received
- A surplus today but structural deficits for a long time
Budget 2024 will be Treasurer Jim Chalmers’ day in the sun, but no one will be watching more closely how it is received in the weeks that follow than the Prime Minister.
Anthony Albanese has more to gain (or lose) than anyone. His future could well be at stake if voters feel disappointed in these tough economic times.
No first-term government has lost a re-election bid in this country since 1931, so on that basis Labor should be confident that a second term is coming.
But in recent decades many have almost lost after just one term, including the last Labor government when Julia Gillard became a minority government in 2010.
Speaking to Chalmers before writing this column, he seemed optimistic about the budget he is preparing, but aware of the challenges.
On Tuesday evening, Treasurer Jim Chalmers (pictured) will present his third budget
“What we’ve tried to do here, Peter, is really pay attention to the economic cycle rather than the political cycle,” Chalmers told Daily Mail Australia.
If you believe that, you’ll believe anything: a politician ignorant of politics? This could be the last budget before the next election. But perhaps the budget will be satisfactory on both fronts, economic and political.
Politically, Chalmers must ease the cost of living for Australians, but he must do so without fueling inflation and therefore without also risking rising interest rates.
It’s a nearly impossible task, and finding the right balance is akin to walking a tightrope. This is Chalmers’ burden.
The reward, if he succeeds, is the credit for any political success that follows. However, failure would not only put the government at risk, but would also deal a major blow to the treasurer’s future leadership ambitions.
The political fortunes of the Prime Minister and the Treasurer are linked to each other and the success of this year’s Budget
After more than two years in government, it is harder for Labor to blame bad economic news on their predecessors. Especially when a conga of independent economists lines up to blame “persistent” inflation on domestic rather than international factors.
Ten consecutive interest rate hikes took place under Labor leadership, but as the trend began while the Morrison government was still clinging to power, the blame was shared.
Labor’s efforts to abstain from blame have been aided by the honeymoon effect. New governments always benefit from such a period after taking office.
Fast forward to today and the political landscape heading into Budget 2024 is very different.
The income tax cuts that the Coalition legislated with Labor support – before Chalmers amended them – will come into force on July 1. Chalmers calls them “the cornerstone of the entire budget.”
Voters are sure to appreciate the extra money in their pockets to help them cope with rising prices. But will Labor get the credit? And will voters even think about giving them credit in the next election?
They will certainly notice another rise in interest rates if that happens, or if inflation persists and prices continue to rise faster than wages.
RBA Governor Michele Bullock (pictured) has signaled that interest rates may have to rise if inflation is not better controlled.
The Prime Minister takes a back seat during Budget week but will closely monitor public reaction (Anthony Albanese pictured)
If Reserve Bank Governor Michele Bullock even hints at inflation remaining “persistent” for longer as a result of the spending in this Budget, Labor will suffer an almighty political blow.
Chalmers was keen this week to send journalists large amounts of data proving how fiscally conservative he has been with new spending in the budget compared to previous treasurers.
This is a mistake, but it is also true.
The Treasurer wants Australians to understand that inflation has fallen from its peaks, but he absolutely knows it remains too high and is a problem for everyone.
“It hasn’t happened enough because people are still under a lot of pressure,” Chalmers told me.
So does the government, and this pressure will only get worse if the budget is seriously degraded.
dailymail us
