Working people’s budgets are under severe and increasing strain.
Rampant inflation, including galloping energy bills, stagnating wages and social security payments, higher interest rates on mortgages and unaffordable rents are making life more difficult, particularly for those on low incomes.
Yet, despite pledging to consider “more support” to ease cost of living pressure before the May election, Treasurer Jim Chalmers’ October 25 budget largely failed to deliver.
Labor’s first budget since 2013 reduces the expected federal deficit from $78 billion, predicted in the Coalition’s final budget in March, to $36.9 billion, by providing a gift to financial markets.
It does this by saving the majority of windfall tax receipts received from mining (owing to high coal and iron ore export prices) along with cuts to some of the more gratuitous spending programs introduced by the former Coalition government.
Additional funding of $531.6 million has been allocated to extend paid parental leave to 26 weeks, in increments between 2023–27, albeit that the leave will be paid at the minimum wage and without superannuation.
An additional $4.7 billion will be allocated to raise childcare subsidies from 2023, while leaving the majority of childcare in private hands. This effectively offers a government-funded guarantee to the profitability of private childcare operators.
The budget also commits an extra $350 million to building 10,000 affordable rental dwellings over five years from 2024 (with the states committing to 10,000 more), in addition to 30,000 more social housing dwellings.
This commitment will barely make a dent in unmet demand. For instance, demand for social and affordable housing in the eight local government areas in Western Sydney alone is estimated to reach 73,121 by 2026.
The budget offers little financial relief to working people being buffeted by high costs and low wages, and even less to those dependent on welfare.
It predicts that electricity prices will rise 56% over the next two years. Real wages are predicted to fall a further 2% over the next year, while the call for a much-needed rise in welfare payments has been denied.
The full extent of the financial pressure on working people only became clear the day after the budget with the release of quarterly inflation figures.
Prices rose by 1.8% over the three months to the end of September, taking annual price growth to 7.3%, according to the Australian Bureau of Statistics.
The biggest contributors to price rises included the price of fuel, housing costs and food — spending few of us can avoid.
At the same time, real wages (nominal wage rates, adjusted for inflation) continue to fall dramatically.
“In the past year real wages fell so far they are now back to 2012 levels,” according to The Australia Institute.
The Australian Council of Trade Unions (ACTU) said workers are likely to have suffered a pay cut of at least 4% pay in real terms for the year, the deepest on record.
“Working people have been waiting a decade for a pay rise and have spent more than a year watching their wages go backwards,” ACTU Secretary Sally McManus said on October 26. “This is a systemic problem which we urgently need to address.”
While Labor continues to trumpet its election commitment to raise the minimum wage by 5.1%, federal public servants only received a 3% rise in October.
“We do acknowledge that it is an improvement to the previous government’s wages outcomes,” Community and Public Sector Union deputy national president Brooke Muscat told the ABC on October 6, adding, “but we don’t think it’s enough, we don’t think it meets the rising cost of living”.
“Current inflation is sitting around 6 per cent, so 3 per cent is well below that,” Muscat added.
High inflation and low wage growth slugs working people doubly.
On the first count, wages and welfare payments do not stretch as far as they used to: the higher the cost of goods and services means we can afford to buy less.
At the same time, high inflation encourages the Reserve Bank of Australia (RBA) to raise official interest rates to reduce demand (and supposedly reduce inflation over time).
“Join the dots,” Sydney Morning Herald economics editor Ross Gittins said on September 19, “and you realise the Reserve’s plan to get inflation down quickly involves allowing a transfer of many billions from the pockets of households to the profits of big business”.
While higher interest rates raise the price of mortgages and rents, there is no limit on the ability of big business to increase prices. Company profits rose by more than 28% in the year to June 30.
Despite Chalmers’ fiscally tame budget, expectations are that the RBA will raise official interest rates by up to 0.5% when it next meets on November 1.
The financial predicament for those on welfare is even worse.
“We remain deeply concerned for people who have the least and are in chronic financial distress — people who are unemployed, single parents, people with disabilities, students and people on temporary visas,” Dr Cassandra Goldie, Australian Council of Social Service CEO said.
“There isn’t enough in this budget to help them right now.”
“People on the lowest incomes cannot take any more,” Antipoverty Centre spokesperson Kristin O’Connell said. “We cannot sustain the brutal welfare policies inflicted on us.
“We’re not coping with the price increases we’ve already seen, let alone more. Electricity and gas going up means more people having their power cut off, more people in debt they can’t repay and more people homeless.”
The federal government has been encouraged to close loopholes in the Petroleum Resource Rent Tax, which would add billions to the budget by more effectively taxing the super profits being earned by gas exporters. While Chalmers confirmed that Treasury is considering possible improvements, he stressed that the government’s focus was on “the code of conduct and on prices”.
Health funding promises are also inadequate. Labor has refused to renew hospital funding agreements with the states struck during the pandemic, which would have maintained federal funding at 50% of costs.
The government has also ended additional funding for an extra 10 Medicare-subsidised visits to a psychologist, which was also introduced during the pandemic.
The budget projected the cost of the National Disability Insurance Scheme (NDIS) would rise by $8.8 billion over four years.
Much of the budget commentary in the establishment media has focused on the predicted rise in the cost of NDIS to $35.5 billion in 2022–23.
“They need more revenue, and they need to cut spending,” Phil Coorey, political editor of the Australian Financial Review, told ABC Radio National on October 26.
“It’s not just about raising taxes, it’s about being brave on the NDIS and really cleaning that thing out and returning it to what it was meant to do, not what it’s become.”
The fact that NDIS returns $2.25 to the economy for every dollar invested and, more importantly, it offers a pathway for persons with disability and their intimate carers, usually women, to engage with society and in many cases return to productive employment, is lost in the rush to cut.
“Speaker, this is a responsible Budget that is right for the times and readies us for the future,” Chalmers declared.
However, for those of us forced to live with it, Labor’s budget is both a missed opportunity and a threat of worse things to come.