Budget Reactions 2024-25
Professor Richard Holden, Professor of Economics at UNSW:
“[On energy subsidies] Chalmers argues they reduce actual inflation. That’s. Just. Wrong. Bunkum. Fake numbers.
“Albonomics is all politics all the time – sound economics be damned.
“This government abolished the fiscal rules dating to Howard-Costello. Chalmers talks of percentages of revenue upgrades he banks. But it’s dollars that count.
“Last year’s budget expanded net spending by 0.8 per cent of gross domestic product in a year. This year it’s another 1.5 per cent. And those increases look permanent. They’re inflationary, irresponsible, and hard to reverse. They deepen and cement our structural budget deficit. They’re anti-prudent.”
(Richard Holden, AFR, 15/05/2024)
Cherelle Murphy. Chief Economist at EY:
“We said the 2024-25 Federal Budget needed to do three things: not add to spending, unless offsetting it elsewhere; change existing policy to lower spending and find new revenue that will persist over time to close the structural balance; and put in place policies to assist the private sector to maximise productivity growth.
“Unfortunately, we were left disappointed on all three fronts.
“With billions being spilled into the economy from 1 July, and without offsetting new spending with cuts elsewhere, the Budget has thwarted the task of tightening the structural deficit.”
(Cherelle Murphy, EY Budget Analysis, 15/05/2024)
Warren Hogan, Economist at Judo Bank:
“The Treasurer can say it until he is blue in the face, but Australia’s fiscal settings as revealed in Tuesday’s budget will not help bring down inflation.
“Despite the best efforts from some commentators this budget won’t be a catalyst for rate cuts. And it probably won’t be enough to stop the RBA tapping on the brakes a couple more times this year.”
(Warren Hogan, AFR, 14/05/2024)
Stephen Halmarick, Chief Economist at CBA:
“Disappointingly, the budget deficits out to 2027/28 are now projected to range from 0.8% to 1.5% of GDP and are larger than the MYEFO estimates. These deficit estimates are larger than ideal for an economy that is expected to see a high level of investment for several years coming from both the private sector and Federal and state governments.
“The risk is now more real that the first interest rate cut could be delayed and that the neutral cash rate is higher than we currently estimate due to the expansionary fiscal setting and the high level of investment in the economy.”
Chris Richardson, Independent Economist:
“What just happened? My big ask of the Budget was that it didn’t poke the inflationary bear. I don’t think it passed that test.
“The government said it would be careful not to frontload its new costs. But that’s exactly what it did – and its new dollars are both big AND fast. In the coming year they’re eight times the size of what they are by 2027-28. So this budget narrows the Reserve Bank’s already narrow path ... We’re in a hole, and we’re still digging. Current conditions are a beautiful backdrop for the budget, yet our decisions are making it harder for the nation to make ends meet over the longer term.”
(Chris Richardson, Twitter, 14/05/2024)
Steven Hamilton, Economist:
“This is the most irresponsible budget in recent memory … The government set itself a simple standard: not to make the Reserve Bank’s job harder. Michele Bullock may just choke on her cornflakes.
“The fiscal stance would be eye-opening in ordinary times. During an inflation crisis with the Reserve Bank on the precipice of further rate increases, it’s downright reckless.”
(Steven Hamilton, AFR, 14/05/2024)
John Kehoe, AFR Economics editor:
“The people who should be most worried about this profligate pre-election budget are Reserve Bank governor Michele Bullock and home loan borrowers.”
Paul Bloxham, HSBC Chief Economist:
HSBC chief economist Paul Bloxham said while rental and energy subsidies would “mechanically lower” rents and electricity inflation, the measures announced by Dr Chalmers would ultimately add to inflation.
“Clearly the subsidies also boost real household disposable incomes — giving households more income to spend. Many households that receive these subsidies are also likely to be up against their budget constraints — due to cost of living pressures ... We expect some of this additional income will be spent, supporting consumer demand and adding to inflation.”
(Paul Bloxham, The Australian, 15/05/2024)
Deloitte:
“The Budget centred on providing cost-of-living relief and investing in the Future Made in Australia Act to support medium-term economic growth. The result is a relatively large increase in government spending over the next four years, potentially putting further upward pressure on inflation.”
(Deloitte Analysis, 14/05/2024)
Ross Gittins, SMH economics editor:
“It’s said you can tell a government’s true priorities from what it does in its budget. If so, the top priority of Anthony Albanese’s government is not to have any priorities.
“Rather than focusing on fixing the most pressing of our many problems, his preference is to be seen doing a little to alleviate all of them.
“This does not fill me with confidence in the Albanese government’s capability. Quite the reverse.”
(Ross Gittins, SMH, 14/5/2024)
COSBOA
“Small business has been left behind in the government’s strategy of picking winners and providing subsidies to selected industries.”
(COSBOA, Press Release, 14/05/2024)
S&P Global
Leading credit ratings agency S&P Global said on Tuesday night the additional cost-of-living measures were “mildly inflationary” and would make the RBA’s job more difficult.
“Rent assistance or electricity rebates might be administered in a way that lowers measured consumer price index inflation but they also put more money into consumers’ pockets to spend on other goods and services,” S&P analyst Martin Foo said.
“Consequently, the ‘last mile’ of the RBA’s inflation fight could remain challenging.”
(Martin Foo, S&P, The Australian, 15/05/2024)
Alan Kohler
“Chris Richardson’s rule of thumb is that for every $7 billion in extra spending, one interest rate hike of 0.25 per cent is required to offset its impact on inflation. So the budget brought down on Tuesday is worth two more rate hikes.”
(Alan Kohler, New Daily, 14/5/2024)