Treasurer Josh Frydenberg has used a lottery-like revenue bonanza to further increase government spending in a frenzied bid to shore up the government’s election prospects in the 2022-23 budget.
Boosted by an increase in expected revenue of more than $120 billion across the forward estimates compared to the forecasts in December’s Mid-Year Economic and Fiscal Outlook (MYEFO), Frydenberg has unveiled a series of smaller deficits for coming years.
The deficit for the current year is expected to fall by $20 billion to $80 billion, and by a similar amount to $78 billion for 2022-23. However the budget will still be more than $40 billion in deficit in 2026.
That’s because the government is using much of that revenue windfall on bribing voters. It is pumping $36 billion in extra spending into the economy across the forward estimates, even on top of the additional spending it announced in MYEFO.
By way of comparison, this time 12 months ago, the government said it planned to spend $593 billion — tonight, it says it will be spending $625 billion.
As a result, 2026 is forecast to become the seventh year in a row with spending above 26% of GDP — a level it has never reached under any government since World War II, but which now looks a permanent default level of larger government under the Coalition.
Among the bribes offered voters — most of which have already been revealed — are:
- A one-off expansion of the low- and middle-income tax offset by $420, costing $4.1 billion
- A one-off $250 handout to pensioners and welfare recipients costing $1.4 billion
- A temporary cut to petrol excise from 44.2 cents to 22.1 cents for six months, costing $2.9 billion
- $2.4 billion in new and expanded Pharmaceutical Benefits Scheme (PBS) listings
- A new billion-dollar deduction for small businesses to encourage them to “go digital”
- Another $1.4 billion in skills training
- The $18 billion (over 10 years) pork-barrelling spend announced on Monday.
As the nature of the spending illustrates, the government is most worried about cost-of-living issues, as well as looking after its traditional base of pensioners and small business.
But the economic story of the budget contradicts — in a fundamental way — the political imperative. According to the budget, the economy is firing on all cylinders and is pretty much at peak capacity. In the budget papers, Treasury explicitly discusses one indicator of peak capacity, the Non-Accelerating Inflation Rate of Unemployment (NAIRU), and states we’re already below the NAIRU, which it estimates is now 4.25%.
Unemployment is expected to go further down to 3.75%, where it will stay for the next three years. Economic growth will be 4.25% this year and 3.5% next year. Household consumption forecasts have been upgraded for this year and the next. Dwelling investment forecasts have been significantly increased next year. Non-mining investment is expected to be healthier. Terms of trade are expected to be significantly better. According to the government’s own numbers, the economy is roaring along.
And yet Frydenberg not only feels compelled to pump deficits of $80 billion in a year into the economy, but he has increased the level of spending over the next four years by $36 billion — beyond the huge amounts he has already committed in a quest to save the government.
That leads to the other set of numbers in tonight’s budget papers: they say inflation will fall back below 3% in 2023, despite the massive spending the government is throwing at voters.
Those numbers make no sense whatsoever. There’ll be a price to pay for such profligate spending when the economy is running so hot. But those aren’t the sort of numbers Josh Frydenberg is interested in.
He’s only interested in the number of seats on election night — and the numbers in the partyroom when the Liberals meet, in government or opposition, after that.
This is a budget that will be defunct at 6pm on election day, no matter the outcome.
A budget devoid of vision. This government doesn’t have a clue. ?
Yes, when will the bastards learn that these one-off sugar hits are not the answer? Instead of a $500 handout to pensioners, say, why not give them $10 a week (or fortnight) forever? Instead of a one-off ‘bonus’ for aged care workers, how about legislating a higher rate of pay for them, to last forever?? Instead of car parks in marginal or Liberal electorates (none of which have yet been built, BTW), how about spending a billion or two on better rail freight services and more efficient ports (that you DON’T sell to China!)
They can’t do that because they need the money to provide permanent tax cuts to those real Aussie battlers on high incomes.
Give them bread and circuses. How can you lose.
People forget, if most ever knew, that the ‘bread & circuses‘ phase was rather short lived.
It was a desperate response to the unrest of the teeming masses cramming into Imperial Rome without purpose or function while foreign mercenaries clamoured to join the legions stretched across the majority of known world.
The decline of civilisations has a strange trajectory, like going broke – at first slowly and imperceptibly then suddenly very, very fast.
You are right to suggest that “bread and circuses” was an indicator of the decline and fall of the Roman Empire but not that accurate about the reason for “bread and circuses”. The Roman army before the Empire under Octavian or Augustus as he became known, was drawn in times of war from the military service of Plebeian family farmers. The constant terms of military service in battles between Roman leaders over power, as well as the wars against Gauls under Caesar and Carthage, led to such an increase in debt among plebeian farmers that many were forced to sell their farms to settle their debts. The farms were bought up by Patrician senators of Rome, so that they had vast estates or Latifundia worked by slaves, who had been taken prisoner and sold as slaves in Rome’s wars. The landless plebeians, who remained Roman citizens, moved into apartments in Rome and were kept alive with pensions-the bread-and entertained with circuses, including contests in which prisoners of war were killed by gladiators. This was the prelude to Rome’s society becoming divided between landless poor citizens and wealthy Patrician’s, who eventually turned away from slaves who were grateful to be worked to death in the fields to being killed in the Colosseum, to relying on families tied to the land, when Rome’s expansion made a continuing supply of slaves difficult, because Rome’s soldiers were tied down to defending the borders of the empire rather than new conquests. Rome’s armies increasingly relied on mercenaries to maintain their strength. These armies succumbed in the western empire, when expanding German tribes in the land east of the Rhine river, which Rome had never been able to conquer, and to the North of Gaul in what is today the Netherlands and Denmark, swept over and conquered Roman lands from Britain down to Gaul, Italy and the Iberian peninsula, where conquering tribes formed Spain and Portugal.
I saw on ABC that it called welfare recipients “winners” for getting that $250. I’m not sure if the journalist who wrote that had a smirk on their face whilst writing it…
The amount is shameful.
That’s what makes the notion that they’re winners from the budget so perverse. Not least because that money is already gonna be eaten by the several ways in which the cost of living has already gone up. At best, it’s treading water. At worst, it completely neglects how deep in poverty our welfare system keeps those on welfare in.
$250 a tank and a half of petrol for a small midrange car.
I filled up my small midrange car yesterday for just under $100, so it’s probably more like 2 and a half tanks.
Mine cost $270 and that was at $2 a litre. I expect $300 next time.
What do you drive – a Hummer?
No mate a LandCruiser ute. The Audi is much better though.
Even a C grade journalist would be on about $250pd – note that I did NOT write ‘earn’.
Do pork barrels have expiry dates?
Not really – they were originally ‘salted pork’ barrels, kept in long term storage against hard times & vicissitude.
The phrase was meant to be highly derogatory, meaning throwing caution to the wind and wasting future survival for a quick popularity blow-out.
A pig in every pot? Dunno, but we sure do have plenty of snouts in the LNP trough, both the pollies themselves and all of their Big End of Town mates….
Has anyone explained the concept of the “Future” to the Morrison / Joyce mal administration ???
And, why does an industry, let’s say the fossil fuel mob as an example, that is hugely profitable and a great business to be in, need propping up with taxpayer funds year on year on year on year ??
Can some one please ask the P/minister for fossil fuel advertising and promotion this simple question.
Perhaps because they’ll threaten to take those holes in the landscape elsewhere?
If only they’d just take their a-holes somewhere far, far away.