An opinion poll this week found that Australians prefer Government spending cuts over tax increases as the best way to help fix the Federal Budget, and these hopes could be rewarded when Treasurer Jim Chalmers brings down the budget on October 25.
According to the poll, only 5% believed that higher tax revenue was the way forward for budget repair, while 21% preferred spending cuts on some services.
The biggest number – 28% – see economic growth as the best way to fund the budget.
With some of the world’s biggest economies set to go into recession, even perhaps this year, hopes that growth will generate more government revenue are likely to be disappointed even if Australia does avoid recession.
Which brings us back to spending cuts, and while Chalmers has been relatively tight lipped on details of the budget this appears to be the way forward for this so-called “bread and butter” budget.
To continue the food analogy, Chalmers’ budget is unlikely to be the one to “bring home the bacon” – as then Treasurer Paul Keating said in 1989.
Unlike previous years, when many of the budget measures were telegraphed well in advance, Chalmers is playing his cards very close to his chest so far, only saying that the budget will be “responsible and solid” and that Australia is not immune to the economic volatility happening elsewhere in the world.
Domestics politics are also at play. Scrapping the stage three tax cuts makes economic sense but is political poison, so the Government is likely to kick them into the long grass and think about them again next May when the 2023 budget is due.
These tax cuts are due to arrive in 2024 and will cost the Government $243 billion over ten years, but the fact that they are due in 2024 gives the Government time to prepare if it does want them scrapped.
What is likely is that some of the previous Government’s pet projects will go on the chopping block. Chalmers says he has been going through the previous budget line by line to identify wasteful spending, and some of these could well be in regional areas where the Morrison Government spent up big to keep its coalition partner the National Party happy and onside.
Budget over runs in the defence department are at $6.5 billion, we learned this week, so there might be some restraints put on the khaki dollar, despite the heightened regional tensions.
Chalmers’ priorities are to find cost of living relief in areas such as child care, medicine and education without putting a big hole in the budget. But don’t expect any subsidies for cheaper petrol, that one is off the table.
Helping Chalmers cause is the extra $50 billion in Government revenue over 2021-22, but with the budget still expected to show a deficit of more than $30 billion its unlikely that the extra revenue will unleash a spending spree.
“It won’t be fancy, it won’t be flashy,” the Treasurer said before jetting off Washington for a meeting with world financial leaders, where he is likely to hear more about how world is heading for recession.
The good news, apparently, is that Australia will avoid a global recession. That’s if the economic commentators are correct, but its fair to say they haven’t got much right lately and that makes the prospect of the 2023 budget even scarier than the one Chalmers is about to unveil.