Budget night is fast approaching and this year arrives against the backdrop of a looming
With the cost of living on the rise, Treasurer Josh Frydenberg will take centre stage on Tuesday night to unveil his fourth budget for the Coalition.
His speech is expected to set the scene for the upcoming campaign, where hip pocket concerns could sway voters at the polls.
and increased commodity prices are set to help improve the budget bottom line, but .
The temptation to launch a pre-election spending blitz also faces warnings from economists to maintain fiscal discipline as the debt load edges toward $1 trillion.
Deloitte Access Economics economist Chris Richardson said history shows “bigger things” can happen in a pre-election budget - particularly when governments are behind in the polls.
“So far the leaks don’t suggest that big this time but there’s a reasonable chance you’ll see a lot of stuff devoted to retail politics,” he told SBS News.
“Despite the better news the Treasurer will give us - the budget still has a bunch of challenges.”
Deloitte Access Economics has forecast the deficit to be $69 billion in this year's accounts.
That’s already $30 billion better than Treasury’s forecast in the pre-Christmas Mid-Year-Economic Update.
It’s also well down from a $204 billion cash deficit in early 2021 at the peak of COVID-19 pain.
“A budget is a social compact - we tax workers and businesses, we spend it on the young and the old and the sick and the poor and a defence force,” Mr Richardson said.
“Getting that right is stunningly important - getting that right has been stunningly hard during COVID.”
Cost of living
Inflation (basically cost-of-living pressures) has come surging back into the economy after years of sitting well below the Reserve Bank’s target of between two and three per cent.
This has seen increasing prices for essential goods, especially petrol, in part the result of supply problems caused by global events such Russia’s invasion of Ukraine and the COVD-19 epidemic.
In Australia, inflation is officially 3.5 per cent, but everybody experiences this differently.
The impacts have also been made worse by slowish wage growth of 2.3 per cent in comparison.
Queanbeyan’s electorate of Eden-Monaro is currently held by Labor on a margin of less than one per cent.
But it's traditionally been considered a bellwether seat, for indicating who will win the election.
Local resident Edward Mapiva - who recently moved onto a disability support pension - told SBS News people are feeling the pinch from the rising cost of living.
“It’s going to be really hard for a lot of people around here,” he said.
“It’s just like the rich get richer and the poor get poorer. It feels like Australia is getting dearer and dearer and dearer to live.”
Queanbeyan resident Edward Mapiva.
“Everything is just so expensive at the moment,” she told SBS News.
“At the supermarket, it cost me $50 more than it usually costs me, which is not good when you’re on a pension."
Queanbeyan resident Sandra Stegwell.
Why the budget matters, despite the coming election
The Coalition wants to use the budget to convince voters to keep faith in its credentials as economic managers ahead of the election, which is less than two months away.
But the poll also means Labor’s budget reply will be eagerly anticipated, as it argues families have fallen further behind because of the Coalition’s mismanagement.
Treasurer Josh Frydenberg has hinted at some cost of living relief, by using increasing tax revenue to fund new payments for families.
Federal Treasurer Josh Frydenberg. Source: AAP / Lukas Coch
But Australian Council of Social Service CEO Cassandra Goldie said this approach alone wouldn’t be enough to help those feeling the brunt of the rising costs of essentials.
“There is no question that for people on low income the cost of living has become crushing,” she told SBS News.
“One-off cash payments are not a fix on that - we need to fix the adequacy of social security. “It’s really clear that we cannot let this go on.”
Global uncertainty and Russia's invasion
The federal government is also facing calls to deal directly with high petrol prices - resulting from the surge in oil prices after Russia invaded Ukraine.
But the government has remained tight-lipped on any final decision on a cut to the fuel excise tax or other options.
Allan Jones is an electrician from Forster on the NSW Central Coast and also spoke to SBS News during a work trip to Queanbeyan, which is around six hours away.
“My bottom line is impacted a lot, cost of travel, wear and tear on my vehicle, accommodation everything’s gone up and my wages haven’t,” he said.
He said any additional support to ease this pressure would be welcome.
“Even if it is just a small bit, it's going to help everybody isn't it,” he said.
Electrician Allan Jones told SBS News travelling for work is getting increasingly expensive.
The economic backdrop
The unemployment rate hit four per cent in February and is predicted by Treasury to fall to the lowest levels seen in half a century.
The economic gains are expected to help bolster the government’s coffers by $5 billion this financial year and $8 billion next year, according to Deloitte.
Economists say the government doesn’t need a surplus to begin repairing the budget but the bottom line does need to become healthier, by identifying where spending can be cut and taxes raised.
Economist Gabriela D’Souza of the Committee for Economic Development of Australia said the main challenge for the Morrison government was to try to match short-term priorities with the long terms needs of the economy.
“In the short term people want to feel an ease in the pressures on their cost of living - but in the long term we do need a dynamic, innovative, productive economy,” she told SBS News.
“We need to have a proper discussion about policy reform and how can alter the tax base and implement policies to try and achieve that.”
Bottom-line pressures include a permanent increase in both social spending - including on health, aged and disability care and defence costs against the backdrop of rising geopolitical tensions.
There’s also ongoing damage to the budget from COVID-19 characterised by fewer migrants despite Australia’s international borders being thrown open.
“The six consecutive quarters of negative [net overseas migration] will have an impact on just how big the Australian economy is in the future,” Ms D’Souza said.
