After a brief flirtation with pruning stage 3 tax cuts, Jim Chalmers has reverted this week to playing down expectations for his first budget.
“It won’t be fancy, it won’t be flashy,” the treasurer insists, sounding like someone about to serve up a sensible meal.
That means little of the candy that voters have become accustomed to in recent budgets: tax cuts, low- and middle-income tax offsets, instant asset write-offs or generous grant schemes.
To be clear, the government hasn’t exactly slammed the wallet shut. The prime minister has barely been out of hi-vis this week, making a string of announcements for big transport and clean energy projects ahead of the budget.
More spending is also unavoidable in what’s now being called the “big five” areas putting the budget under increasing strain: the NDIS, aged care, health, defence and interest payments on debt.
The expectation that Chalmers is trying to manage, however, is that Tuesday’s budget will offer the sorts of direct hand-outs that hit bank accounts within months. That’s not happening.
But this budget has the potential to lay some important foundations.
Three problems stalking the budget
The first problem is to acknowledge Australia has a spending problem.
The second is to acknowledge Australia has a revenue problem.
And the third is to change the way we think about budgets, by incorporating measures of “wellbeing”.
On the first of these foundations, the treasurer has spent weeks laying out the spending problem. He’s referenced the “big five” at every turn.
We’ll no doubt hear more about these growing cost pressures in Tuesday night’s budget speech.
Little can realistically be done to rein in spending in some of these five areas — such as on aged care and interest bills — but savings are being explored in others.
To that end, NDIS Minister Bill Shorten this week brought forward a review of the scheme, which is now forecast to cost more than $50 billion a year by 2025-26.
On the second foundation he’s seeking to set — acknowledging a revenue problem – Chalmers is stepping more cautiously.
No treasurer wants to declare “we need to collect more tax”, but he has gently pushed the conversation along.
A week of flying the kite on whether to trim stage 3 may have looked politically messy. It did, however, highlight the bigger point: More revenue needs to come from somewhere.
The treasurer has hinted at giving this message a further nudge on Tuesday night.
“I feel like the country’s ready for a pretty honest conversation about our economy and about our budget,” he told Sky News yesterday.
We’ll see. It no doubt depends on where that “conversation” goes.
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