A federal 2024 Budget to address fiscal priorities and political challenges

The media’s response to the Budget has been so maniacal that it’s hard to judge whether it’s good… or not. It could have been much better but it’s best to look at what the economists have to say.

The release of the federal 2024 Budget has created the usual firestorm of media criticism and debate, highlighting the complexities of governments managing financial planning and the public reception, especially when it comes to Labor governments. Key players in the media landscape, such as News Corporation and Nine/Fairfax, have been particularly scathing in their evaluations of this Budget, often focusing on the negatives. This contrasts with the perspectives of leading economists such as Chris Richardson, who views the Budget as a beacon of fiscal positivity, promising substantial tax cuts and increased government spending designed to bolster the economy swiftly and reduce inflation significantly.

Amidst this backdrop, the portrayal of Treasurer Jim Chalmers in the media as either a jester or a confused and foolish politician on the cover of the Daily Telegraph highlights a continuing trend of antagonism towards Labor governments, a biased right-wing lens through which such budgets are often scrutinised. This depiction forms part of a broader media strategy that perennially cast Labor Budgets and financial initiatives in a dubious light, irrespective of their actual efficacy or intent.

Leading banking economists and market responses, indicated by the rise in the ASX 200, suggest a more favourable reception, recognising the potential of the Budget to stabilise and stimulate economic growth within the Australian economy. This narrative is often lost in mainstream media coverage, which tends to emphasise minor negative aspects, overshadowing broader economic benefits and such coverage raises questions about the influence of media biases on public perception and the potential consequences for political accountability and governance.

Historical comparisons highlight an inconsistency in economic management reputations between different governments, which promote Liberal governments as prudent and spectacular, whereas Labor governments are depicted as reckless, hopeless and incompetent. However, transformative economic reforms under Labor leaders such as Bob Hawke and Paul Keating during the 1980s, and effective crisis management during the global financial crisis under Kevin Rudd and Wayne Swan in 2008 provide evidence of competent Labor stewardship, challenging the stereotype of Labor’s fiscal irresponsibility.

Yet, the Budget’s reception is mired in a cacophony of mainstream media skepticism which tends to amplify dissenting voices like that of conservative economist Warwick McKibbin, while underplaying supportive economic assessments. This selective amplification contributes to a polarised view that may not fully reflect the broader economic consensus or the substantive content of the Budget measures.

Is the 2024 federal Budget good for the economy? Or not good for the economy? It’s probably best not to look at assessments arising from the mainstream media, amid their predictions of the falling sky and an economic Armageddon just around the corner, because their habit is to always criticise the performances of Labor governments. It’s the golden rule of Australian economic journalism.

Dissecting the discrepancies in government spending and social commitments

In the analysis of the Budget, a discrepancy emerges between the government’s projected economic path and the realities of its financial allocations. With a hefty budget of around $730 billion, the allocation decisions reflect both the government’s priorities and the political constraints it faces. Despite significant public and political pressure, the government has resisted raising the JobSeeker payment to 90 per cent of the pension level – or an increase from $381 to $500 per week – a change advocated by various social service groups and even segments within the business community. This resistance is damning, given the Labor Party’s historical advocacy for more robust social safety nets, leading to criticism that the party is not living up to its principles or the expectations it set while in opposition, where it constantly demanded the Coalition make a substantial increase to unemployment benefits.

There is a historical comparison between Anthony Albanese’s reluctance to increase JobSeeker and former Prime Minister John Howard’s reluctance to apologise to the Stolen Generations, and this illustrates a deeper political fear – a fear of facing backlash from conservative media outlets, which usually attack increased welfare spending as supporting ‘dole bludgers’, or providing a disincentive to work. Increasing JobSeeker rates would be politically advantageous at this stage but Albanese, like Howard on the apology, refuses to budge on this issue. This highlights the political will that is often shackled by perceived media narratives and the fear of electoral repercussions, which in turn stifles progressive reforms.

The Budget speech by Treasurer Jim Chalmers emphasised a vision of resilience and prosperity, aiming to address immediate pressures while fostering long-term growth. However, this vision is somewhat contradicted by continued large-scale subsidies to the fossil fuel industries, totalling around $11 billion annually, and this allocation persists despite widespread acknowledgment of its environmental and fiscal inefficiency. It’s a legacy issue that no government has dared to fully tackle due to the political influence of powerful industry groups, as evidenced by past campaigns against resource taxation reforms, especially the campaign against the mining tax in 2010, which ushered in and fast-tracked the removal of then Prime Minister, Kevin Rudd.

In contrast, the allocation of $21 billion to the ‘Future Made in Australia’ scheme, which supports renewable energy and rare mineral exploration, represents a strategic shift towards sectors where Australia has competitive advantages. While this initiative is commendable and necessary for transitioning to a sustainable economy, it is juxtaposed against underfunding in other critical social areas such as housing and the creative industries. For example, only $6.5 billion is earmarked for social housing and homelessness – sectors in desperate need of investment.

The Budget also fails to address other significant revenue opportunities or tax reforms, such as revising negative gearing and franking credits, which continue to benefit wealthier segments of society disproportionately. These omissions highlight a cautious approach to fiscal management by the Labor government, influenced by fear of political backlash rather than economic prudence or social equity.

There is also a broader concern with the Labor government’s apparent loss of nerve upon assuming office, a pattern observed since the end of the Hawke–Keating era in 1996, and this timidity in governance contrasts sharply with the bold visions articulated in opposition – the historical reminder of Rudd’s retreat in the face of mining industry pushback exemplifies this issue. The current government’s reluctance to confront similar challenges suggests a continuation of a defensive and risk-averse strategy that prioritises political survival over transformative policy-making. There should be better ways to manage government and implement a progressive agenda but it appears this hope is being pushed into a faraway place somewhere on the distant horizon.

The opposition’s Budget response

The response of the opposition to the Budget has been as contentious as the Budget itself, reflecting the deeply polarised nature of contemporary Australian politics. Leader of the Opposition, Peter Dutton, criticised the budget heavily – even before it was released –attributing any perceived successes to the policies of the previous Coalition government, discrediting the Labor government’s strategies and blaming them for ongoing economic challenges such as inflation and high energy costs.

In this fantasy land of the Coalition, the positive effects in the current state of the economy are somehow the result of their economic management between 2013–22 – even though they almost destroyed the economy – yet, any negative effects are only caused by the management of the Labor government since they assumed office in 2022, as if the economy discerns the actions of the government of the day, sifts through the good and the bad of the economy, and allocates it according to party lines.

Dutton’s remarks highlight the typical adversarial dynamic in politics, where achievements are minimised and failures are magnified across party lines. His characterisation of the Budget as “inflationary” and detrimental to families and small businesses highlights a significant divide in economic philosophy between the government and opposition. His metaphor of the Budget as a “band-aid on a bullet wound” vividly conveys his reactionary perspective that everything is a problem – even if it’s not – but it is a critique which aligns with traditional conservative concerns about neoliberal economic policies, particularly regarding spending and its impact on inflation and interest rates.

This lack of coherence in the opposition’s critique – along with the performances of Shadow Treasurer, Angus Taylor, who usually claims that a solution to every economic problem is just a matter of “getting back to basics” – weakens their position, and when everything just becomes a sound grab for the media, it just reduces their effectiveness in holding the government accountable. The opposition’s narrative, focused more on condemning the government rather than proposing viable alternatives, also diminishes their credibility with the electorate, especially if the electorate perceives it as political posturing rather than substantive economic critique.

As this Budget is likely to be the last before the next federal election, it does carry significant weight for the government. It is designed to consolidate support and address criticisms of economic management – a strategic move in light of the impending election. The distribution of benefits, such as the $300 electricity rebate which has been universally applied rather than means-tested, could be seen as an attempt to appeal broadly to voters, though it has attracted criticism from various quarters for being either too generous or not targeted enough.

The legacy of the previous Coalition government is also relevant when compared with the current Budget, with a lack of substantial achievements or positive reforms from past Coalition Budgets, who appeared to squander their opportunities in government to navigate the economy through difficult times and spread the benefits to as many people as possible throughout the community. This historical context frames the 2024 Budget as not just an economic document but as a corrective measure, aimed at rectifying past mismanagements. While the Budget has been criticised for not being transformative enough, it should also be seen as part of a larger, more gradual process of repair and renewal.

The 2024 Budget is more than a financial statement; it is a political instrument shaped by and shaping the country’s economic and political landscape. It reflects the government’s priorities and strategies for navigating a challenging economic environment, while also revealing the tensions and conflicts inherent in the political process. The opposition’s response, marked by traditional criticism and lacking in coherent alternatives, highlights the adversarial nature of politics, which often complicates rather than clarifies the economic choices facing the nation. The electorate’s challenge is to navigate these complex narratives and discern which criticisms are valid and which are part of the typical political theatre surrounding national budgets.