Budget portends more of same as growth flounders

Ahead of Tuesday’s budget, Jim Chalmers is unable to say when the bottom line will return to surplus. That “remains to be seen”, the Treasurer told Sky News on Sunday, predicting the pre-election budget would be about “hip-pocket help”. That includes a $150 rebate for every household and small business power bill. The Coalition’s promise to wave this and other sweeteners though suggests politics, not fiscal responsibility, is uppermost in the minds of frontbenchers on both sides. While Finance Minister Katy Gallagher said the Albanese government would deliver $2.1bn in “savings and reprioritisations” on Tuesday, her pledge to lower spending on consultants by $720m was as specific as the government was on Sunday. Such spending should be lowered, but it is fiddling at the edges of what is needed to avoid years of structural deficits.

Ahead of the week that could make or break Anthony Albanese, Peter Dutton and the economy, the Coalition has provided few insights into its plans to tackle the nation’s structural deficit. The Opposition Leader needs to spell out the details, and his priorities for economic reform, in his budget reply speech on Thursday. One of his weakest links, Treasury spokesman Angus Taylor, wasted a chance on the ABC’s Insiders to nail the case. Echoing Dr Chalmers, Mr Taylor said the Coalition would reduce the structural deficit “over time”. While promising to release the cost of the Coalition policies at a later date, he was unable to say whether the Coalition would increase defence spending or lower income tax. Those issues need to be tackled in the context of the budget, or the opposition will be increasingly exposed on its scant economic agenda.

Defence spending and tax reform will be two of the main issues in shaping national security and productivity for decades to come, and will be closely watched on Tuesday and Thursday. As Greg Sheridan writes, Mr Dutton must commit to increasing defence spending to 2.5 per cent of GDP within one parliamentary term “or, sadly for us, we’ll have to conclude the Liberals are nearly as flaky and hopeless on defence as the Albanese government”.

Opposition finance spokeswoman Jane Hume was correct when she said the National Disability Insurance Scheme had “run out of control” and spending had to be brought “under control”. While the scheme is essential, it is a growing drain on taxpayers. The Coalition and Labor must face the need to reform eligibility criteria and ensure that the states shoulder their responsibilities to families whose children suffer from mild cases of autism.

Reining in big-spending items including the NDIS will be central if the Coalition is to honour its promise, made by Mr Taylor, to move the budget towards “structural balance” over time by “growing the economy faster than spending”.

Fiscal discipline and a plan for productivity-enhancing reform should be front and centre of the budget – from both major parties – as inflation risks persist and the changing global trading environment threatens economic growth. As EY chief economist Cherelle Murphy noted in the firm’s budget preview, “tens of billions of dollars have been promised for new programs and infrastructure in the lead-up to the 2025 election”, along with “indiscriminate policies to lower expenses for all households, with more expected”.

Off-balance-sheet spending, which adds to gross debt, the preview said, was set to increase at record levels of more than $20bn a year, with new government promises of $2.4bn for the Whyalla steelworks rescue package, $2bn for the Clean Energy Corporation, $3bn for NBN upgrades and $500m for the Green Iron Investment Fund.

Only the most impressive productivity growth seen for decades will be sufficient to fund both sides’ investment spending aspirations, but that would necessitate productivity reforms that neither appears to have the vision or courage to contemplate.