PETER VAN ONSELEN: Jim Chalmers insists the 2024 Budget is all about bringing down the cost-of-living for Aussies doing it tough – but will it be enough?

Treasurer Jim Chalmers will deliver his third budget Tuesday night.

The big question: Is this an electoral budget? Chalmers insists that is not how he puts it.

‘Oh no. What we have tried to do here is to be really attentive to the economic cycle, and that means a really responsible Budget, a fairly restricted Budget. But a budget that focuses overwhelmingly on the cost of living puts pressure on people to feel good,’ Chalmers told me.

With elections due to be held before the middle of next year, and possibly before the end of this year, Budget 2024 could be the last to be delivered before voters go to the polls.

So what do the Chalmers think Australians should look out for in Tuesday night’s budget?

«Well, the cornerstone of the entire budget is a tax cut for all taxpayers. An average cut of about $36 a week to help with the cost of living,’ Chalmers said.

These are the changes Labor made to the Coalition’s Stage Three tax cuts, characterized as a broken election promise after Anthony Albanese promised legislated tax cuts would be implemented as he promised.

But Chalmers and Albanese have not apologized for breaking that commitment. Chalmers made it clear that he re-designed the cuts to favor younger voters who he said “have been losing for too long.”

‘People can expect to see that (the new income tax cuts) in their bank accounts from July. We think that’s really important. “It is the largest part of the cost of living support in the budget, but not the only one,” Chalmers said.

Another form of help contained in Budget 2024 is reductions in the indexation of Higher Education Contributions (HEC), retroactive to last year.

“This is about recognizing that students suffered the consequences last year, when inflation was especially high in the way they calculated their student debt,” Chalmers said.

But what about the millions of taxpayers who subsidize that change and who did not go to college or have already paid off their debts without help? There is anger between those groups.

‘Oh, I understand. “It is very rare that a decision taken by the government, even a good one, receives unanimous support… but that is not the only thing we are doing in the Budget,” he stated.

Other notable budget measures include allocating more money to housing as part of funding agreements with states.

‘The budget will build substantially on the $25 billion we are already investing in building more homes for Australians. We know we don’t have enough housing, which is why rents are higher than we would like them to be. That’s why it’s difficult for people to enter the market,” the treasurer said.

Chalmers described the election commitment to build 1.2 million new homes by 2029 as “ambitious but achievable”, but in a sign he recognized they might not get there, he also noted that “it’s going to be difficult, but not impossible”.

At this time, the construction of new homes is far below what is necessary to achieve the promised objective. To drive that, Chalmers said developing the construction workforce is vitally important.

“That is why we have announced these 20,000 free opportunities for people who want to work in the building and construction sector,” he said.

The budget is being delivered against a backdrop where inflation is too high and recent reports have suggested there is even a chance that interest rates could rise, rather than fall. At least the previous expectation that they would fall this year now seems less likely.

How does the Treasurer view the challenge of reducing inflation?

“It’s really the defining goal of the budget to provide all the help we can,” he said.

But that help – in the form of more spending – could have the opposite effect and stoke inflation. Chalmers is well aware of the balancing act.

“Frankly, that’s what we’ve spent the most time dealing with as we put this budget together.

“So balance is really the word that defines this budget,” Chalmers stated.

Living standards in Australia have suffered their biggest drop in more than half a century. Chalmers wishes to share the blame for this reality with the Coalition.

“Oh, when we came into office we were very aware that one of the big problems was that people’s wages were going backwards,” Chalmers said.

‘That was a combination of high and rising inflation in the first half of 2022 (when the Coalition was in power) combined with a decade of wage stagnation (during most of which the Coalition was in power).

“And so we’ve been working very hard to change that.”

Chalmers cited rising real wages in some parts of the economy as something he is proud of in his first two years in office.

When asked for a simple way to assess whether Budget 2024 is a success or failure come the time of the next election: if rates don’t rise, you did well; If they do, then he was wrong in his spending, Chalmers rejects the binary system. choice.

‘I think it’s an oversimplification. “My job is to try to overcome this inflationary challenge and help people cope with it and invest in the future.”

Former Treasury Secretary Ken Henry, with whom Chalmers worked when he was a clerk for then-Treasurer Wayne Swan, has described the burgeoning terms of trade that Chalmers and other treasurers have enjoyed as “silly luck” that is saving Australia from making decisions policies.

When asked if he agrees that bad luck has gotten him where he is, Chalmers pauses and gets a little angry before saying, “Err, no, you won’t hear me say that,” adding, “but there’s some really important parts of that question.”

“Firstly, we appreciate the important role the resources sector plays in our economy…we can’t say it enough.”

Labor is desperate to retain the swathe of WA seats it won at the last election.

The Treasurer also highlighted the strength of the labor market: “780,000 new jobs created under the Albanian government and the recovery of wages.”

Chalmers noted that the “revenue improvements” in the Budget are largely a consequence of “the strength of the labor market”.

But what matters is what the government does with the increased income that the terms of trade have helped.

Chalmers remains adamant: “We’ve accumulated it overwhelmingly over the first two years in office.” Our predecessors spent most of it. “We have saved most of it.”

“That has made a big difference because it means we can reduce debt and pay less interest on it,” he said.

But while Budget 2024 is expected to show a surplus for this financial year and next, it is also likely to lead to deficit forecasts in subsequent years. And many economists have expressed concern about the underlying structural deficit, when unexpected and booming sources of revenue are removed from the budget’s bottom line.

With more than $1 trillion of accumulated public debt and higher-than-expected interest rates, there is an argument that Labor should spend even less than it claims.

That appears to be the direction Opposition Leader Peter Dutton will take in his budget response speech on Thursday night. Combine the challenge that spending creates for future debt growth with the stimulating impact it has on inflation.

Chalmers’ budget forecasts suggest he will get inflation back within the 2-3 percent range sooner than most economists predict. Also sooner than anticipated by the Reserve Bank of Australia.

“Inflation has decreased dramatically since 2022,” Chalmers said.

“What we’re trying to do is design our cost of living assistance in a way that we can alleviate some of the pain of this inflation that all of your readers are suffering.”

That sounds like the key performance indicator by which the Treasurer and the Labor government should be judged at the next election. It is a risky business, but they are prepared for the political fight.