Australia Institute May 2023 Budget Wrap

Budgets are about choices and each budget tells you a lot about the government and their priorities.

In this budget we saw the Albanese Government fund a 15% pay rise for aged care workers. This is a significant pay rise for an important industry that has suffered years of neglect. The budget also had more money for bulk billing, money for more energy efficient homes, small increases in the rates of JobSeeker and rent assistance, and expanded eligibility for the parenting payment.

All of this was long overdue and while there was a lot in the budget that moved things in the right direction, as our budget analysis shows, much of it was incremental and falls short of solving the many problems facing Australia.

Inflation and rising interest rates loomed over this budget and the government had to keep a close eye on the role the budget has in managing the wider economy. Higher inflation risks keeping interest rates higher for longer, so the government needed to minimise any inflationary impacts the budget would have.

At the same time more people were struggling to pay for life’s essentials like shelter, food, and utilities, and were being crushed under the weight of the cost-of-living crisis. Even when considering the inflationary impacts of spending, governments should help those most in need. After all the economy is there to serve us and is not a vengeful God we need to make sacrifices to.

The budget has largely avoided creating significant inflationary pressure by being smart with its spending. The Australia Institute has previously shown that the government can use fiscal policy to directly affect prices. The government is doing just that. For example, it is taking $500 off vulnerable household’s electricity bills. This not only gives cost of living relief by reducing the amount that households need to pay for electricity, but because electricity prices are part of the Consumer Price Index (CPI), this reduction directly reduces the CPI.

The biggest missed opportunity from this budget was the failure to scrap the Stage 3 tax cuts. The Stage 3 tax cuts come into effect in July next year and no change was made to them in this budget. Since they were announced in 2018, the Australia Institute has done plenty of research that has explored how unfair and economically reckless the Stage 3 tax cuts are. We have been doing research on them since they were announced in 2018. Early on the Australia Institute was almost alone in opposing them. It was gratifying to see so many journalists talking and asking about the Stage 3 tax cuts this year even though they were not even mentioned in this budget.

The budget is a treasure trove of government decisions and priorities. In this budget wrap we have dug out the very best bits that will help you better understand what the government most values and where Australia is headed.

As always, this budget has been another whirl of activity here at the Australia Institute.

On Tuesday night a few of our economists raced straight out of the lockup at Parliament House to give some initial reactions on the budget.

Then it was back to the office where our researchers and comms team were hard at work creating more budget insights. The next morning, we did several media interviews with Radio National Life Matters and BBC TV, among others.

And in case you missed it, you can find our Budget webinar and our Politics in the Pub event on our website, along with the budget episode of Follow the Money podcast.