BUDGET – AUSTRALIA

Cost-of-living handouts that bust inflation a trick

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Original article by Patrick Commins, Joe Kelly
The Australian – Page: 1 & 4 : 14-May-24

The federal government has confirmed that the 2024 budget will feature measures to combat inflation and the cost-of-living crisis, including electricity bill rebates and rental assistance. However, former Reserve Bank of Australia board member Warwick McKibbin contends that using government subsidies to combat inflation is a "political trick" that will not address underlying price pressures in the economy. McKibbin has also questioned the Treasury’s forecast that inflation will return to the RBA’s target range of 2-3 per cent by the end of 2024. He adds that the Treasury and the RBA have underestimated the inflationary impact of the revised stage-three personal income tax cuts that take effect on 1 July.

CORPORATES
AUSTRALIA. DEPT OF THE TREASURY, RESERVE BANK OF AUSTRALIA

Rate rise still priced in despite Chalmers’ forecast

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Original article by Alex Gluyas
The Australian Financial Review – Page: 28 : 14-May-24

AMP’s chief economist Shane Oliver is amongst those who have questioned the federal government’s forecast that the headline inflation rate will fall to 3.5 per cent by the end of June. He notes that it is uncertain as to how cost-of-living relief in the budget will impact on inflation, given that the financial year ends in about six weeks. Paul Bloxham of HSBC in turn says the budget is likely to boost the Reserve Bank’s preferred measure of core inflation, which is likely to rule out an interest rate cut in 2024. Meanwhile, futures traders still expect the central bank to increase the cash rate this year.

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AMP LIMITED – ASX AMP, HSBC HOLDINGS PLC, RESERVE BANK OF AUSTRALIA

Surplus of $9.3b, then a sea of red ink

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Original article by Phillip Coorey
The Australian Financial Review – Page: 1 & 4 : 14-May-24

The federal government is set to announce a budget surplus of $9.3bn for 2023-24, having previously forecast a deficit of $1.1bn in the mid-year economic and fiscal outlook in December. It will be only the second successive budget surplus since the global financial crisis; however, this will be followed by large deficits over the forward estimates period, which the government has attributed to "unavoidable spending". Meanwhile, Prime Minister Anthony Albanese says it will be "a Labor budget through and through", with cost-of-living relief that will reduce rather than increase inflation and a tax cut for every worker.

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AUSTRALIA. DEPT OF THE PRIME MINISTER AND CABINET

Chalmers to fight inflation, then spend

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Original article by Ronald Mizen
The Australian Financial Review – Page: 1 & 4 : 7-May-24

The federal government’s budget on 14 May will show that Australia’s gross debt has risen to $904bn in 2023-24; this is about $152bn lower than was forecast ahead of the 2022 federal election. However, the nation’s debt-to-GDP ratio is expected to rise from 33.7 per cent in the current financial year to 35.1 per cent by 2025-26. Meanwhile, Treasurer Jim Chalmers has signalled that combating inflation will be the key focus of the 2024 budget, while he has flagged an increase in government spending over the forward estimates period.

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AUSTRALIA. DEPT OF THE TREASURY

Chalmers to fight inflation, then spend

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Original article by Ronald Mizen
The Australian Financial Review – Page: 1 & 4 : 7-May-24

The federal government’s budget on 14 May will show that Australia’s gross debt has risen to $904bn in 2023-24; this is about $152bn lower than was forecast ahead of the 2022 federal election. However, the nation’s debt-to-GDP ratio is expected to rise from 33.7 per cent in the current financial year to 35.1 per cent by 2025-26. Meanwhile, Treasurer Jim Chalmers has signalled that combating inflation will be the key focus of the 2024 budget, while he has flagged an increase in government spending over the forward estimates period.

CORPORATES
AUSTRALIA. DEPT OF THE TREASURY

PM set to invest big in green hydrogen

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Original article by Sarah Ison, Rosie Lewis, Jess Malcolm
The Australian – Page: 1 & 5 : 1-May-24

The federal government’s budget on 14 May is expected to include a significant investment in ‘green’ hydrogen. This is tipped to exceed the $2bn that Labor committed to its Hydrogen Headstart program in 2023. Clean Energy Council CEO Kane Thornton notes that the government considered that investment to be a "down payment" on its support for Australia’s nascent hydrogen industry. There is speculation that the government will provide the hydrogen industry with direct subsidies; the options under consideration are said to include a tax credit model and a reverse auction process.

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CLEAN ENERGY COUNCIL LIMITED

$13b surplus tipped but Labor needs credible plan

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Original article by Ronald Mizen
The Australian Financial Review – Page: 7 : 1-May-24

Deloitte Access Economics expects the federal government to post a budget surplus of $13.4bn for 2023-24. The government itself had forecast a full-year deficit of $1.1bn in its mid-year economic and fiscal outlook in December. Deloitte says the budget bottom-line will be boosted by $14.5bn in additional company tax receipts and a $5.6bn increase in personal income tax revenue due to the strong labour market. Deloitte partner Stephen Smith says that while Labor is on track for a second successive budget surplus, this is unlikely to be repeated in 2024-25 due to the goverment’s spending plans. Smith adds that the Future Made in Australia policy could further undermine the budget position.

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DELOITTE ACCESS ECONOMICS PTY LTD

Spending cuts must take heat off rates

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Original article by John Kehoe
The Australian Financial Review – Page: 4 : 30-Apr-24

Economists are calling on the federal government to cut net discretionary spending in its 14 May budget, contending that such spending is making it harder for the Reserve Bank to combat inflation. Shadow treasurer Angus Taylor and Coalition finance spokeswoman Jane Hume said on Monday that the government should "restore budget discipline" by reintroducing the Coalition’s 23.9 per cent tax-to-GDP cap. Treasurer Jim Chalmers responded by claiming that the Coalition is advocating cuts to spending.

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RESERVE BANK OF AUSTRALIA, AUSTRALIA. DEPT OF THE TREASURY

Inflation means tax cuts could pose a risk

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Original article by Sarah Ison, Lydia Lynch
The Australian – Page: 6 : 26-Apr-24

AMP’s chief economist Shane Oliver says the higher-than-expected inflation data for the March quarter means the revised stage-three income tax cuts present a greater economic risk than when they were first announced. He contends that the tax cuts to be announced in the 14 May budget would have been less of a risk to the economy if inflation had been falling. Veteran economist Chris Richardson notes that it has been known for a long time that the tax cuts will be inflationary. Consumer prices rose by one per cent in the March quarter; this compares with economists’ expectations of 0.8 per cent growth, and the 0.6 per cent increase in the December quarter.

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AMP LIMITED – ASX AMP

PM signals budget help for families, small business

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Original article by James Massola
The Sydney Morning Herald – Page: Online : 4-Apr-24

Prime Minister Anthony Albanese will use a speech on Thursday to state that small businesses and families will be ‘front and centre’ again in the federal government’s budget on 14 May. He will note that assisting families and small businesses with their energy bills was a key priority of the 2023 budget. Albanese’s comments in his Council of Small Business Organisations of Australia speech will heighten expectations that the government is set to extend its Energy Bill Relief fund, which is slated to end on 30 June. He will also emphasise the importance of small businesses to Australia’s future prosperity, noting that they are job creators, innovators and early adopters of technology such as clean energy.

CORPORATES
AUSTRALIA. DEPT OF THE PRIME MINISTER AND CABINET, COUNCIL OF SMALL BUSINESS ORGANISATIONS OF AUSTRALIA LIMITED