The Albanese government’s first budget contains little to inspire Labor voters. The much-touted “cash splash” of $21 billion over four years amounts to about $4 a week for every Australian, not even enough for a cup of coffee at the prices we are paying now. The health and education sectors are going backward, while football stadiums and submarines get top billing.
Dismal though this picture is, a closer look at the budget papers makes things look even worse. Assuming the budget projections are realised, Labor’s first term will end with workers having gone backward on every front.
Real wages will be lower than when the government was elected. Although the budget projects an increase of about 1%, this will not be enough to offset the decline experienced in 2022-23. With profits growing strongly, the wage share of national income is likely to be at an all-time low.
Unemployment will be higher than when the government was elected and above the level considered by the Reserve Bank and Treasury as sustainable in the long run (the non-accelerating inflation rate of unemployment, or NAIRU). Recent estimates have this rate at 4.25%, while the government is projecting 4.5%. Moreover, the NAIRU is consistently higher than a measure that actually represents full employment, where there are as many jobs vacant as workers looking for them. The recent period with unemployment below 4% represents the first time we have approached this rate in nearly 50 years.
The Albanese government was elected promising a commitment to full employment, including a new white paper on full employment modelled on the 1945 paper produced by the Curtin-Chifley government. But the word “full” vanished somewhere along the way. And in his budget speech, Treasurer Jim Chalmers appeared content with the claim that unemployment would remain below the (unacceptably high) average of recent decades.
Middle-income earners will be paying more tax, and high-income earners much less than when the government was elected. Labor’s decision to phase out the $1500 low and middle income tax offset (LMITO) on the (repeatedly delayed) schedule of the previous government, and to offer no offsetting change, will amplify the effects of bracket creep. Meanwhile the stage three tax cuts will give those at the top of the income distribution an extra $9000 a year. This is massively more than the trivial amounts being offered to the rest of the population as “cost-of-living relief”.
Faced with unpleasant facts like this, Labor loyalists are mostly unwilling to defend the government directly. Rather, they make the claim that “things would have been even worse if the other side had won”. Given the general awfulness of the Coalition government, this claim seems plausible on its face. However, it could benefit from more careful consideration.
Had Labor not won a majority in the 2022 election, there are three other possibilities. First, we could have seen a Labor minority government, relying on the support of Greens and centre-left independents. Alternatively, an LNP minority government could have been formed with the support of more conservative independents (the regular protestations from the major parties that they would never “do deals” in such circumstances can safely be disregarded). The final, least likely possibility is that of a reelected LNP majority.
From a left or centre-left viewpoint, there can be little doubt that a minority Labor government would have been preferable to the actual outcome. Labor would have had little option but to address real problems in the health and education sectors, to go beyond token action on climate change, and to raise JobSeeker substantially. The cost would have been a modest budget deficit rather than a surplus and a decision to scrap or restructure the stage three tax cuts.
What about a minority LNP government, presumably with Josh Frydenberg reelected in Kooyong and reappointed as treasurer? Like Jim Chalmers, Frydenberg would have been under intense pressure to do something about the cost of living, and would probably have offered similar small-scale measures. Given that nearly all the independents saw the Morrison government’s $50-a-fortnight increase in JobSeeker as inadequate, some further increase would probably have been in Frydenberg’s budget.
Burnt by past experience, Frydenberg might have avoided making too much of the projected surplus. Nevertheless, with a surplus in prospect, the government would probably have held the line on phasing out LMITO while delivering the stage three tax cuts, the jewel in Scott Morrison’s crown. Overall then, an LNP minority would probably have delivered a budget very similar to that brought down on Tuesday.
It is only in the event of an outright LNP majority that the budget would have been notably worse than the one we received, and even then only in relatively marginal details. Unlike Labor, the government would not have been shamed into another increase in JobSeeker. And we could expect plenty of smaller shifts in emphasis, rewarding friends and punishing enemies.
In general though, the Albanese government has not only adopted the tax and expenditure policies of the Morrison government as a matter of expediency. It has accepted the world view underlying those policies, one in which inflation matters more than unemployment, budget surpluses are an infallible sign of good economic management, and incentives for “aspirational” high-income earners matter more than electorally unpopular moves to help the unemployed.
In the end, the Labor “rustadons” are right: a reelected majority LNP government would have been worse. But it’s a sad comparison to make.
Do you think we’d have been better off under a minority Labor government? Let us know by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
After nine years of Coalition budgets which made no allowance for the disadvantaged and looked after the top end of town at every turn, while attracting little criticism and certainly no line-up of disadvantaged unemployed and students in budget night media, the Labor Party is now expected to solve all injustices in one budget.
Tripling the bulk-billing subsidy, raising the wages of Aged Care workers, increasing rent assistance, increasing Jobseeker, decreasing pharmacy costs, subsidising power bills, etc, etc are to be ignored in favour of ‘it’s only a cup of coffee’ commentary.
Some of the same media crying ‘not enough’ now were screaming ‘disaster’ when Labor tried to make a minor change to Superannuation tax rates for the mega-wealthy. I’m sure they’d also like to act on franking credits, capital gains tax discounts, negative gearing et al. My guess is they will, but it takes political capital to achieve and what we are seeing is Labor building up that political capital. It’s not sexy, but it’s real politics.
I cannot believe that commentators are screaming ‘failure’ after less than a year in government. On budget night, one commentator asked if Albo was playing the long game and whether more would be done on Jobseeker. Of course he is and it will be.
And give up on the latest put-down, the ‘rustadons’. Plenty of ‘rusted-ons’ are politically aware, are lifetime empathetic to the disadvantaged (which is often why they’re rusted on) and are aware through a lifetime of seeing Labor fail to stay in government that it takes more than knee-jerk media to sway them.
The problem is that we are seek borderline false reporting and shifting goalposts, like in the article about, in reaction to the fact that Labor has stuck to its election commitments. Some brief examples:
“the Albanese government has not only adopted the tax and expenditure policies of the Morrison government as a matter of expediency. It has accepted the world view underlying those policies”
This is demonstrably false – in the last 6 months alone Labor has legislated substantial IR reform, which will lift real wages, and a huge intervention in the domestic energy market to cap gas prices. Neither were particularly Morrison like.
“It has accepted the world view underlying those policies, one in which inflation matters more than unemployment”
The problem is that this is a false dichotomy – right now unemployment is low and inflation is high, and even we of the broad left need to accept that high inflation is utterly crushing on low income families and it is right to fight it. Even a rabid MMT’er would have to agree with the idea that a government adding to the economy is still partially inflationary.
even the ones we could have done without, like the Stage 3 tax cuts, and the white elephant submarines.
Well said.
I agree in part with your view here…but also this is true…. The so called ‘Long Game’ is even longer for those pushed down the bottom through decadal policies cementing in structural inequality. Sadly Labor has also been party to some of those policies. The Gillard attack on single mums was shameful, and still hasn’t been rectified. The failure to tax big coal and gas companies a windfall tax in this budget another example…this budget could have sought billions more and delivered it. But chose not to. The stage 3 tax cuts will be fatal for any sense of Australia as a fair and functional economy for the average person….and the housing crisis, supercharged by capital gains and negative gearing, utterly screws so many including most of those under 40. Don’t even mention the ridiculous panic deal on the subs was signed pre election without any debate, that are useless for at least another decade, and for which Keating was mostly right about, we could have spent half as much to get better defense outcomes. So I guess those people suffering from precarious unemployment, skyrocketing rent and etc may not have the patience to play the ‘long game’ as Labor has…and the electorate has just possibly shifted, so Labor playing to the press gallery and hoping to satisfy the conservative media may actually turn out to be out of touch with the electorate. I want to give Labor more time, they shouldn’t be expected to fix everything in one or two budgets….but they could easily have done a hell of a lot more in this one as part of a decent start and they chose not to. Taking the pressure off them and making excuses does not help the situation. We’ll see how the electorate, particularly the younger part of it that is so structurally done over by current settings, responds. If you genuinely want to see Labor succeed I would be ringing them now and saying ‘not good enough comrades’.
I agree with many of your fair points (although I could add the raising of the Single Parenting Allowance to 14 years from 8 years – another good action). If the Stage 3 tax cuts go through without amendment, I’ll join you in protest, but I’ll wait and see on that. One of my popints is also that the Coalition didn’t get a fraction of post-budget angst about ignoring the disadvantaged, but Labor does plenty (agreed, not yet enough) and gets condemnation. They did plenty in the Budget. I hope plenty more will come.
As I former “rustadon” I will be doing my bit next rlection to get a minority Labor govt. I will be voting independant, preferencing other independants and Labor. As usual the LNP will be at the bottom only ahead of the worst minority fruitloop candidates.
I agree with you!!
The first and most crucial aim of the last election, was to oust Morrison and his gang. And that objective was achieved. Big tick!!
This current government had a clear choice, it could be a place holder til the next election, or it could be an important player in revitalising the political system, which is changing with or without them.
Albo had (still has?) the opportunity to create a relevant ALP that could be the leading force in helping shape a new way of living in this country. With each disappointing decision, or timid baby step, i am starting to think he’s chosen the placeholder option.
Let the next election relegate them to a minority government, so we can get on with the next phase of building a sustainable future. It would have been nice not to lose these three years – especially after the last decade! – and i don’t think it’ll be a total loss…but sheesh, it’s just a bit f*cken annoying!!!
They’re both captive to the same economic and geopolitical paradigms (as well as the same over-archingly conservative media), so not sure what people were really expecting from New Labor other than some tinkering at the margins and playing up the cultural differences. But that tinkering at the margins can still be very meaningful – particularly where it results in more equitable pay for healthcare workers and a more equitable healthcare system than you could ever hope for from the Libs. Increasing voter support for the Greens and some independents is a good thing for the ALP, though, because having moved so far from the centre left of 70s Labor they need that tension to keep them in check. A couple of ALP seats lost at the next election to the Greens would be a good outcome.
View from the pub…
For fairness and ethics in government, the LNC–with its focus on commerce and industry (‘business’, in other words) to the exclusion of all else—is a lost cause, and for their part, Labor need to refocus on social imperatives… fair relativity in wages for everyone in the medical sphere (including hospital nursing and EMT) below the level of management, everyone in the health care sphere below the level of corporate CEO, and everyone in police and firefighting roles, again below the executive level. For these expenses to be met, there needs to be an end to the misdirected bellicose rhetoric around physical foreign threats to our shores and the funds being diverted to satisfy that pugnacity. In this respect, it would greatly assist if the standard of journalism in this country could somehow be jacked back up to where it was 30, 40, or 50 years ago.
I forgot to include education (at all levels below that of university management). Utterly critical…
Love this line – So True.
there needs to be an end to the misdirected bellicose rhetoric around physical foreign threats to our shores and the funds being diverted to satisfy that pugnacity.
Driven in our usual kowtowing way by the USA.
Best Quote I’ve read over the last few days. (Thanks to “Swing Required”).
Certainly better than all the criticism from just about every Journalist and non Labor Politician.
And talking about Opposition Politicians, and their cheer squad Media partners, they had their Budget attack lines out working a week before the Budget was even delivered – Perfect example was Peter Dutton mentioning the word “Inflation” about a hundred times in a 10 minute interview on Insiders, (3 days before the Budget).