Treasurer’s big budget clue for families

Treasurer Josh Frydenberg has dropped a big clue that the budget will include cost of living relief for families.

Treasurer Josh Frydenberg has dropped a big clue that the March budget will include cost of living relief for families to tackle the rising cost of petrol prices and interest rates.

As the Prime Minister prepares to call an election within weeks, the Morrison Government is preparing to deliver “targeted” assistance to clawback voter support.

While the Morrison Government is playing down the prospect of direct cash handouts and speculation over a cut to beer tax, government sources have confirmed that some options are being examined including modest petrol tax relief.

Mr Frydenberg has flagged that the cost pressures families are experiencing as a result of rising inflation will be addressed in a major speech to be delivered on Friday.

“In the Budget in less than two weeks’ time, there will be further measures to support families to meet the cost of living pressures, in a targeted and proportionate way,’’ he said.

Despite speculation of direct cash handouts, government sources are playing down the prospect of cash handouts for low income families ahead of the May election.

But Mr Frydenberg said he understood families were feeling pressure over rising petrol prices and grocery costs.

Treasurer Josh Frydenberg. Picture: AAP Image/Mick Tsikas

“While inflation in Australia is less than half of the 7.9 per cent seen in the United States and well below that of the United Kingdom, Canada, Germany and New Zealand, cost of living pressures are real,’’ he said.

Any changes to petrol excise are likely to be expensive as the cost of petrol and diesel soars to an all-time high of 216.5¢ a litre in Sydney and 212.5¢ in Melbourne.

However, one option that could be considered is pausing the next petrol excise increase due to come into effect in August.

The political problem that looms for the government is that any reduction in fuel excise means a massive hit to the budget with limited benefits to consumers.

Even 1 cent a litre fuel excise cut could cost the federal budget $500 million.

Another option under consideration is extending its low and middle tax offset for another year, which would deliver tax savings of up to $1080 to 10 million people who earn less than $126,000 a year.

The political problem with this option, is that this would not take effect until the 2023-24 financial year.

The Treasurer’s speech will also confirm the Morrison Government is moving to the “second phase” of the fiscal strategy designed to stabilise the budget and reduce debt as a share of the economy.

“This year’s Budget will confirm that this is the trajectory we are now on,’’ Mr Frydenberg said.

“It will show a substantial improvement to the budget bottom line – the product of more Australians in work and fewer Australians on welfare.

The treasurer has dropped a big clue that the March budget will include cost of living relief.

“Gross debt will not only stabilise but will decline over the medium term.”

But he also cautioned that the days of JobKeeper and big cash handouts had come to an end.

“The time for large scale economy-wide emergency support is over,’’ he said.

Tax cuts

Mr Frydenberg said the Morrison Government’s tax-to-GDP cap of 23.9 per cent remained a key element of his fiscal strategy.

“This imposes a discipline on the expenditure side of the Budget and is consistent with the Coalition’s values of cutting taxes, not increasing them, enabling Australians to keep more of what they earn,’’ he said.

Covid variants

The Treasurer also issued a warning that new Covid-19 variants could still deliver curve balls to the economic recovery.

“The pandemic is still with us and new variants may yet emerge,’’ he said.

“There is war in Europe, which has heightened geopolitical risk and threatens global growth.

“Together, the pandemic and events in Ukraine are straining supply chains and driving up energy prices and inflation.

Spending cuts

Mr Frydenberg also pledged that budget repair would not rely on brutal spending cuts.

“A sharp and sudden tightening in the fiscal settings would likely be counter-productive, undermining the

economic recovery and ultimately hurting the Budget,’’ he said.

“We do not want to put at risk the hard-fought gains we have made.”

Budget “all politics”

Labor treasury spokesman Jim Chalmers said the budget was “all politics” and risked being full of election sweeteners now and spending cuts later.

“This Coalition Government has barely anything to show for the record debt they had already multiplied, even before the pandemic,” he said.

“This is showing all the signs of another Budget full of secret slush funds before the election and secret cuts after.”