The ASX is poised to drop a fraction as the country wakes up to the first budget surplus since 2007. ASX futures were down 6 points, or 0.1%, to 7244 early this morning, while the dollar was trading 0.3% lower at 67.64 US cents.
Wall Street was similarly flat overnight, with the Dow even, the S&P 500 dipping 0.2% and the Nasdaq down 0.4%.
Back in black
Let’s look at what the Albanese Government, still in its first year in office, handed down in its second Federal Budget last night.
The headline of course is that Chalmers and co have managed to bring in a surplus, in the order of $4.2 billion, for the first time in 15 years.
While this is no small deal, there are a couple of caveats – the first being that the surplus will be with us for a short time only before we plunge back into debt for at least the next three years.
The other problem for the government is that it can’t take credit for the surplus. Indeed, those on the opposition benches have repeatedly trotted out the line that it could have been delivered by a drover’s dog – presumably to soften us up for what is nevertheless big news.
Instead, we can thank strong commodity prices, a tight labour market and the increased revenue that comes from it, and generally good economic tailwinds that aren’t expected to last.
Chalmers was keen to point out that the measures in the budget were anti-inflationary, though many others have disagreed – more on that later.
All this isn’t to say the budget didn’t have a lot to offer.
Cost of living
The centrepiece of the budget is a $15 billion cost of living package designed to cushion small businesses and households from the impact of rising inflation and interest rates.
There was big news on the healthcare front, with $3.5 billion channelled into Medicare to improve bulk billing incentives – a tripling of the fee doctors will receive to bulk bill, which will result in better access to affordable medical care for the most vulnerable in society. It was a move lauded by the Australian Medical Association.
There was also $358.5 million in funding for more Medicare ‘urgent care’ clinics, which would take the pressure off GPs and hospitals and also improve access, and an expansion to the public dental service to ensure that 360,000 adults on lower incomes had continued access to the scheme.
Improvements to access of drugs on the Pharmaceutical Benefits Scheme (PBS) schedule – including allowing patients to buy two months’ supply of 320 common medications for the price of one – were also designed to reduce bottlenecks in an overburdened healthcare system. The move has rankled pharmacists.
The budget allocated $247.4 million to new anti-smoking and anti-vaping measures, including support for quitters and stronger regulations on e-cigarette imports, packaging and dispensing.
As promised, the government gave aged care workers, some of the lowest paid in the country, a 15% pay rise, at a cost of $11.3 billion.
COVID-19 is still a considerable line item in the budget too – $2 billion is set aside for vaccine programs, education and to combat break outs for at least the next two years.
The $9.5 billion in welfare increases include $4.9 billion to Jobseeker and a boost to rent assistance in the order of $2.4 billion or 15%.
The government also extended the single parent pension so that it cuts out when the youngest child is 14 rather than eight.
Chalmers was adamant that the sweeteners in the package would have a negligible impact on inflation because they were spread over four years in a $2 trillion economy.
"With this package we've targeted it, we've made it responsible over a period of time, and that's because our cost of living package is designed to address cost of living pressures, not add to them," he said.
Infrastructure
The government has committed $15 billion to the National Reconstruction Fund, which it touts as one of the largest investments in manufacturing in the country’s history.
The fund is designed to ensure that strategic industries have a future ‘made in Australia’.
Through loans and equity, the fund will “partner with the private sectors to invest in priority areas that leverage Australia’s natural and competitive strengths in renewables and low emissions technologies, medical science, transport, value-add in agriculture, forestry and fisheries, value-add in resources, defence capabilities and enabling capabilities.”
Energy
On the energy front, the headline spend was $2 billion towards green hydrogen, which has been championed by Andrew Forrest for some time. The program will involve production subsidies to make production commercially viable and to compete with the US’s Inflation Reduction Act.
There was also $1 billion channelled into low-cost loans to help households adopt clean energy measures, with $300 million going towards retrofitting social and low-cost housing with sustainable energy technology.
Economists were divided on whether they agreed with the Treasurer’s insistence that the budget was anti-inflationary.
Barrenjoey indicated in a statement to the ABC that it thought the budget left the issue of inflation in the hands of the RBA:
"We would broadly agree with Treasury's assessment that this budget does not materially worsen the inflation problem but – importantly – these policies aren't generating disinflation or deflation, leaving the job of bringing inflation back within the 2-3 per cent target band largely with monetary policy."
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