Australia Votes 2019: The Budget

By Dr Mark Triffit; Dr Sam Tsiaplias
Lecturer, School of Social & Political Sciences, University of Melbourne; Senior Research Fellow, Melbourne Institute

Politics: Dr Mark Triffitt, Lecturer, School of Social and Political Sciences

The budget is a politically clever array of targeted assistance and spending. Despite not achieving a surplus this year, the projected A$45 billion in surpluses plus a healthy unemployment outlook over the next four years, will also help the government frame themselves as a ‘safe pair of economic hands’ into the election campaign.

There’s a deft mix of infrastructure spending to shore up support in key electorates, as well as a clever combination of small business incentives targeted at its core constituency. There is funding for healthcare and skills aimed at offsetting what will be a strong election pitch by Labor in these areas.

But given it’s more an outright election pitch than a bold reform budget, its fiscal pluses can also be viewed as political risks. The economy has been building up some significant headwinds over several years, particularly around low to non-existent wage increases and cost of living pressures.

The budget’s tax cuts may seem large in macro terms but along with the relatively small, one-off energy assistance package they aren’t likely to neutralise these longer-run, hip pocket issues for individual voters.

The bigger strategic problem the Government faces is that being so close to the election, the budget doesn’t leave much room for further big spending announcements.

The long list of budget giveaways is likely to create a feel-good factor for a week or two. But in a five or six-week campaign where the government has fired most of it spending guns at the start, it has effectively locked themselves into a campaign strategy framed predominantly around the negatives of the opposition.

This is unlikely to sit well with an increasingly jaded and distrustful electorate.

Economics: Dr Sam Tsiaplias, Senior Research Fellow, Macroeconomics Research Program, Melbourne Institute, Applied Economic & Social Research

After 11 consecutive budget deficits, the 2019 budget is expected to achieve a small surplus of about 0.4 per cent of GDP in 2019-20. This reflects a trend away from relatively large deficits, which averaged 2.7 per cent of GDP over the period 2008-09 to 2016-17 before falling rapidly in the last few years.

This falling trend has been driven by rising receipts, which have grown at a substantially faster rate than spending. However, given the soon to be announced election, it is unsurprising that the government has decided to spend more in this budget.

A key issue will be whether the spending will ramp up household consumption and private sector investment.

On the whole the measures seem sensible.

Bringing forward tax cuts should stimulate consumption at the margin, while leaving the housing markets alone will minimise some of the additional short-term pressure that would stem from the partial removal of negative gearing and capital gains tax discounts.

At the same time, this is yet another budget still focused on the short-term with little to be said about important factors such as the future health and welfare implications of an ageing population.

This is a shortened version of an article originally published by Pursuit. For more expert analysis on infrastructure, tax and more head to Pursuit.

Banner image: Treasurer Josh Frydenberg delivers the budget in the House of Representatives on 2 April, 2019 in Canberra, Australia. Source: Getty Images.


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