BUDGET – AUSTRALIA

Pay rises to cool but wage bills bite

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Original article by David Marin-Guzman
The Australian Financial Review – Page: B5 : 10-May-23

Treasury had forecast 2023-24 inflation of 3.50 per cent in October, but has lowered its prediction to 3.25 per cent in the 9 May budget papers. Wages growth is expected to be at four per cent in 2023-24,compared to Treasury’s forecast of 3.25 per cent growth in October. However, it did not revise its wages growth forecast for 2024 to 2027, expecting pay rises to remain at 3.25 per cent over that period. Meanwhile, Cairns restaurant Wild Thyme operations manager Catherine Pacey said she had decided in December to close the cafe on Sundays and Mondays, because Mondays are quite quiet and wages are quite high on Sundays

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AUSTRALIA. DEPT OF THE TREASURY

Dole hike strikes the right balance

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Original article by Sarah Ison
The Australian – Page: 5 : 10-May-23

The federal government’s 2023 budget includes some $4.9bn worth of measures for people who are unemployed. Treasurer Jim Chalmers has announced that welfare payments such as JobSeeker will rise by $40 a fortnight, which equates to an increase of less than six per cent. In contrast, the government’s Economic Inclusion Advisory Committee had recommended a 40 per cent increase. The government will also reduce the age threshold for older unemployed Australians to qualify for a higher JobSeeker payment from 60 to 55; Chalmers notes that many people aged 55+ struggle to find work, with women in particular being over-represented in this age group.

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AUSTRALIA. DEPT OF THE TREASURY

Tax bonanza but slower growth ahead

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Original article by Joyce Moullakis
The Australian – Page: 25 & 28 : 10-May-23

The budget papers show that the federal government’s corporate tax take is slated to total $138.4bn in 2022-23, compared with $123.3bn in 2021-22. Company tax receipts up to March were $7.6bn higher than had been forecast in Labor’s first budget in October, reflecting the increase in earnings in sectors such as resources. However, company tax receipts are forecast to total $128.7bn in 2023-24 and $119.8bn in 2024-25. Treasurer Jim Chalmers noted in his budget speech that global economic growth is expected to slow significantly over the next two years, which will affect the domestic economy, businesses and exporters.

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AUSTRALIA. DEPT OF THE TREASURY, AUSTRALIAN LABOR PARTY

Well-off super savers face $2.3b hit

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Original article by Hannah Wootton
The Australian Financial Review – Page: B10 : 10-May-23

The budget papers have confirmed that the tax rate on the earnings of superannuation funds with balances of more than $3m will increase to 30 per cent from mid-2025, and that the cap will not be indexed to inflation. The tax change is forecast to generate revenue of $2.3bn in 2027-28, its first full year of receipts collection. This is based on the number of superannuation accounts that are currently above the cap, although this may change if people shift money out of super in order to avoid the cap. Meanwhile, the federal government will press ahead with plans to require employers to pay their staff’s super entitlements at the same as their wages, rather than allowing them to do so each quarter.

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Higher spending, deficits keep pressure on rates and taxes

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Original article by Phillip Coorey
The Australian Financial Review – Page: B1 & B4 : 10-May-23

The budget papers have confirmed that the federal government expects to post a surplus of $4.2bn for 2022-23. Labor’s first budget in October had forecast a deficit of $36.9bn for the current financial year; however, government revenue has increased by $130bn since October, while its interest payments on debt have fallen by $15bn. The government has saved more than 80 per cent of the revenue upgrades since October. Meanwhile, the Treasury has forecast a budget deficit of $13.9bn in 2023-24, and the budget is not expected to return to surplus again until 2033-34. The Treasury expects the domestic economy’s growth to slow to 1.5 per cent in 2024, due to factors such as high interest rates and the slowing global economy. Inflation is turn forecast to fall from seven to six per cent in 2023, before falling to 3.25 per cent in 2024; inflation is not expected return to the Reserve Bank’s target range of 2-3 per cent until 2024-25.

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AUSTRALIA. DEPT OF THE TREASURY

Iron ore, coal price rises add $22b to the bank

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Original article by Mark Ludlow
The Australian Financial Review – Page: B12 : 10-May-23

The budget papers show that the Treasury has upgraded its price assumptions for key export commodities. Treasury has traditionally adopted a conservative approach to commodity price forecasts, which was reflected in the federal government’s first budget in October. The iron ore price had been forecast to be around $US55 per tonne by now, but this has been upgraded to $US60/tonne. The price assumptions for LNG, thermal coal and metallurgical coal have also been upgraded. Treasury expects the revised price assumptions to boost the budget bottom line by around $2bn.

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AUSTRALIA. DEPT OF THE TREASURY

Coalition’s $50 JobSeeker rise more generous than Labor’s proposal, Pocock says

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Original article by Amy Remeikis, Paul Karp
The Guardian Australia – Page: Online : 3-May-23

The federal government is under scrutiny over reports that an increase in the JobSeeker payment in the 9 May budget will be restricted to people aged 55+. Independent senator David Pocock has called for an across-the-board increase in unemployment benefits and the youth allowance, saying it appears that younger people are being "left behind". Pocock adds that Labor risks being unfavourably compared to the former Coalition government, which increased JobSeeker and other support payments by $50 a fortnight in April 2021. Liberal MP Bridget Archer and teal MPs have also called for an increase in JobSeeker for all recipients.

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AUSTRALIAN LABOR PARTY

Budget warning after RBA shock

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Original article by Michael Read, Phillip Coorey
The Australian Financial Review – Page: 1 & 6 : 3-May-23

Treasurer Jim Chalmers says the Reserve Bank of Australia’s decision to increase the cash rate to 3.85 per cent on Tuesday underlines the fact that inflation remains the primary challenge for the domestic economy. Chalmers adds that the latest rate increase highlights the need to ensure that the budget on 9 May does not add to Australia’s inflation outbreak. Amid calls for an increase in welfare payments, Chalmers has stresssed that the budget will include "responsible cost-of-living relief" that does not add to inflation. Meanwhile, RBA governor Philip Lowe has conceded that further interest rate rises may be needed in coming months in order to reduce inflation to the target range of 2-3 per cent; however, he says the RBA does not need to get inflation back to the target straight away, while it also cannot take too long to do so.

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AUSTRALIA. DEPT OF THE TREASURY, RESERVE BANK OF AUSTRALIA

Burying a $34bn budget bomb

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Original article by Patrick Commins, Geoff Chambers
The Australian Financial Review – Page: 1 & 4 : 19-Apr-23

The federal government’s Economic Inclusion Advisory Committee has made 37 recommendations in a report that has been released ahead of the budget on 9 May. The Treasury’s modelling suggests that implementing all of the recommendations would cost more than $34bn over the forward estimates period. This includes $24bn for the committee’s proposal to increase the JobSeeker allowance to 90 per cent of the age pension. Treasurer Jim Chalmers has indicated that the government will consider some of the recommendations, but he has downplayed the prospect of a large increase in JobSeeker amid the need for fiscal restraint. However, he says the budget will include measures to address disadvantage.

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AUSTRALIA. DEPT OF THE TREASURY

PM demands budget spending offsets

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Original article by Phillip Coorey
The Australian Financial Review – Page: 1 & 4 : 7-Feb-23

The current inflation rate stands at 7.8 per cent, and Treasurer Jim Chalmers told parliament on 6 February that it is "obviously unacceptably high" and will stay higher than the government would like for longer than it would prefer. Prime Minister Anthony Albanese says spending restraint must be the theme of its 10 May budget, particularly as around 20 per cent of all mortgage loans will switch from fixed rates in 2023 to much higher variable rates. It is understood that Albanese has told his ministers not to come up with new spending proposals for the budget unless they are accompanied by offsets

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