Labor’s Budget must pass four key tests
By David Hughes
First published in the MRC’s Watercooler newsletter. Sign up to our mailing list to receive Watercooler directly in your inbox.
The Albanese Government can talk a big game on fairness, but their actions tell a different story.
Fairness was a central value of the Labor movement. Yet it’s now shifted into the periphery. We see union bosses profiting from workers on the one hand and Labor politicians pandering to the fascination of an urban elite at the expense of the working class. And what of the greatest injustice of our time—a population straddled with record household and government debt weighted against a declining share of younger workers paying increasingly higher rates of tax. There is nothing fair about that.
With a Budget and Election looming you are set to hear more about the ‘party of fairness’. When you do, consider this one example.
Griefline is a 37-year-old charity offering critical mental health support. It is now on the brink of shutting down its counselling hotline due to sudden federal funding cuts. Dozens of other mental health organisations are in limbo, waiting for clarity on their future funding.
Meanwhile, nearly half a million dollars has been locked in until the end of 2027 to fund a project that seeks to use ‘opera as a lens to examine gender inequality in the career advancement of conductors’.
This contrast isn’t just stark—it is obscene. The more you waste on ideologically driven vanity projects the less you have to spend on vital services. And when fiscal discipline is abandoned and grants are distributed through a firehose, what hope is there for lower inflation or balanced budgets?
‘Responsible economic management’ and ‘fairness’ are not competing or incompatible concepts—a point our most competent governments have understood. Yet modern Labor doesn't even have a grasp of either concept in isolation let alone the ability to combine them both in an economic strategy.
Now, the stakes are even higher. The upcoming Budget was never part of the plan—Labor was forced into delivering one on the back of a cyclone which delayed the election. Their lack of preparation and the absence of an overarching strategy is a recipe for disaster.
We need a plan to get Australia through the next five years, not just get Albanese through the next five weeks. Australians need to judge it against four critical tests:
1. A cap on Tax
We measure the tax burden through the tax-to-GDP ratio. It is set to hit a 20-year high of 23.8% this year. Governments should not be constantly reaching deeper into the pockets of hardworking Australians to cover their own fiscal recklessness. A growing tax-to-GDP ratio is a sign of an economy weighed down by excessive taxation. The Budget must show a clear plan to keep the tax burden from rising further, particularly as bracket creep pushes middle-income earners into higher tax brackets.
2. A credible plan to reverse Australia’s productivity freefall
Productivity growth is the foundation of real wage increases and long-term prosperity, yet Australia’s productivity levels are in decline. The Budget must include real, pro-growth policies—industrial relations flexibility, reduced regulatory burdens and a real plan for lower energy prices—rather than more lazy government subsidies and handouts that do nothing to drive innovation or efficiency.
3. Reining in inflationary spending
The Government is enjoying a revenue windfall from strong exports (a good thing) and higher-than-expected income tax receipts. The Government has a pattern of claiming credit for surprise revenue uplifts, then funnelling this temporary uplift into more ongoing spending. If Treasurer Jim Chalmers wants to claim credit for improved revenue from exports, then by the same logic, he must also take responsibility for higher inflation and falling living standards caused by his economic mismanagement. Reckless spending must be reined in to avoid fuelling further inflation, which acts as a hidden tax on every Australian family.
4. Easing the cost-of-living crisis without making it worse in the long term
Families are struggling under the weight of skyrocketing mortgages, power bills and grocery prices. The Budget must provide relief without adding to inflation. That means no more cash splashes disguised as cost-of-living support and no further distortions in the housing market. Instead, it should focus on controlling migration, reducing energy costs, and removing barriers to competition that drive prices down naturally.
The Albanese Government is running out of excuses. This Budget will reveal their true priorities—will they choose responsible economic management and a plan for the future, or will they continue down the path of short-term political gain, reckless spending, higher taxes, and ideological indulgences?
Australians are watching. The test begins now.