Last night the Treasurer handed down his second budget in seven months. My assessment of his first budget in October ’22 was “solid, nothing brilliant, but sound and steady”. At that time, the forecast included a 22/23 deficit and increasing unemployment. Albeit with the benefit of hindsight it is hard to comprehend how Treasury and the Reserve Bank could be so out of touch with what’s really happening in the economy. Thankfully those predictions were very wide of the mark with record resource and energy prices and continued full employment seeing a surplus of $4.2 billion and a fall in gross debt of $80 billion for the June ’23 year.
The Treasurer’s 23/24 forecast has the economy returning to a deficit of $14 billion, however given the strength of commodity and energy prices and the value of stocks like BHP, RIO, Woodside and Fortescue, I am expecting 23/24 to be much healthier than this. Credit where it’s due – Jim Chalmers is only the third Treasurer posting a surplus in more than 30 years, joining Peter Costello in 2008, and Paul Keating back in the ‘90s. So, for all the claims that it’s the Conservatives who best manage the economy, there’s a growing confidence that Treasurer Chalmers is a steady hand with the fiscal purse.
The greatest hurdle facing this Government is arresting inflation which the Reserve Bank continues to attack by increasing interest rates and inflicting the greatest pain on those with a mortgage, most of whom are families. Typically, these borrowers are only just coming off low-interest, fixed-term loans and so the real pain of the rate hike is just beginning to bite. Surely the “legislated tax cuts” in 23/24 will add to inflationary pressure. It will give most to those who need it least – those on the highest incomes. I suggest that the Treasurer axe those cuts to ensure the budget stays in surplus longer. This would ease pressure on inflation and interest rates and allow the Government to retire further national debt. It would be a decision for the greater good. However, that’s Jim’s dilemma for next year!
Given the conservative setting of this budget, it was of little surprise that new stimulus measures for business were almost non-existent. The uncapped instant asset write-off incentive ends on 30 June, to be replaced by a very modest asset value limit of $20,000. If you have over $3m in your superannuation balance the earnings above that threshold will be taxed at 30% from the 25/26 year. Otherwise, the real thrust of the budget is reducing the cost of medical services and modestly increasing the support incomes for those on Austudy, JobSeeker and Youth Allowances. Making health services more affordable is targeted at pensioners, concession card holders and children, with the Government offering doctors a significantly enhanced fee to bulk bill patients. It is hoped that this will significantly ease the pressure on public hospitals, particularly in country areas.
As with the first of Jim Chalmer’s budgets, this is another steady effort, the details of which can be read by clicking on the following links from the Institute of Chartered Accountants:
I hope you find this helpful, and if you have any queries, please feel free to contact any of us at Edney Ryan on (02) 9908 9888.