Smallest of silver linings, with tough times ahead of us

Treasurer Jim Chalmers is ‘well aware it will fade from view almost as suddenly as it materialised’. Picture: Getty Images

Usually when treasurers deliver a budget, they focus on the financial year ahead, not the current one. This year that would be the 2023-24 financial year.

While Jim Chalmers did do some of that - highlighting changes to income support and measures to address inflation - the focus leading up to his speech was on the delivery of a surplus for the current financial year … the first in 15 years, and that achievement will dominate the narrative in the days ahead.

Anthony Albanese used the morning of the budget to exclaim that the single digit surplus would be used to pay down debt.

The Treasurer has been slightly more circumspect when it comes to the importance of the surplus, well aware it will fade from view almost as suddenly as it materialised.

Labor likes to highlight that the Coalition left it with a trillion dollars of debt and that line was rolled out again by Chalmers. Putting to one side that the figure is gross, not net, debt, and that both sides of politics share the blame, the tiny surplus isn’t going to do a lot to reduce such a large principal.

Besides, the budget out years reveal a swift return to deficits as tough economic times set in. Chalmers was careful to note this looming reality, which is precisely why Australia needs structural budget reforms, very few of which were in this document.

Labor has made all the right noises about the need to curtail spending growth in social ser­vices, and the budget does do that in areas like the NDIS, but not nearly enough to address structural deficiencies.

Labor is caught between fiscal reality and a desire to deliver “a Labor budget”. That is, one that isn’t defined by cuts.

Yet without wholesale tax and federation reforms, another bad budget situation is only going to get worse in the years ahead. Spending growth locked into the budget out years speaks to that.

Just over a quarter-century ago, the Howard government handed down its first budget, which was also its most popular. It involved major cuts to spending ahead of a tax reform package it then took to the 1998 election, which included the introduction of a consumption tax (alongside income tax cuts).

Labor hasn’t used this budget to do anything remotely similar. Its excuse is the cost of living challenges Australians are facing.

The problem the new government faces is that it is highly doubtful modern voters would reward Labor had it buckled down and delivered a tougher budget, such is the age of entitlement in which we live.

Voters rewarded Peter Costello when he took that risk, but back then the tough economic times of the early 90s were fresh in people’s minds.

Really tough times are ahead of us. Back then, the public understood getting the budget on a stable footing was painful but necessary.

Modern voters expect only pain-free improvements.

So we will have to settle for five minutes of budget sunshine with a surplus this financial year before debt continues to build with no solutions at hand in the out years.

There are good elements within this budget’s policy scripts. Clamping down on kids vaping is one. Reprioritisation of defence spending is another. But piecemeal changes from portfolio to portfolio are no substitute for recalibrating the overall budget.

And don’t be fooled by the narrative that Labor has gotten wages moving again. With inflation has high as it is, real wages continue to go backwards.

Peter van Onselen is a professor of politics and public policy at the University of Western Australia and Griffith University.