Tuesday 14 May 2024 the Albanese-Chalmers Government released its third Budget since being elected, and forecasts a headline grabbing ‘back-to-back’ surplus. This Budget is an exercise in providing costs-of-living relief to taxpayers, incentivising investment in chosen sectors and keeping a check on – and reducing – inflation.
In general terms, the budget aims to:
- ease cost-of-living pressures
- build more homes
- invest in a ‘Future Made in Australia’
- strengthen Medicare and the care economy.
Cost-of-living has factored heavily in government thinking since emerging from the COVID-19 pandemic, with policy makers tightening the reins on loose spending hangover. In doing so, the Government is toeing a narrow line between stalling economic growth, and rampant inflation.
In the backdrop of these difficult economic choices, the Government is presented now with an increasing unemployment rate (which is favourable to a slow on inflation), and Australian businesses putting the brake on spending, and limiting their expansion.
The Government has also pointed to the risks posed to the Australian economy with softening growth in China translating to weaker commodity prices, and ongoing geopolitical tensions with the potential to deliver shocks to the global economy.
Even with these difficulties, the Budget is expected to deliver a $9.3 billion surplus for 2023-2024 following on from a surplus of $22 billion last year. The surplus, the first consecutive one since 2007-2008, is no doubt welcomed by the Government to fund some of its spending measures. It is also indicative of the ‘firmer hand’ taken by the revenue authorities in recent times, and the stronger measures taken to curb indebtedness to the Commissioner.
This course (and the unfavourable conditions generally) is proving costly to the solvency of Australian businesses, with ASIC reporting that the number of companies entering external administration by 30 June 2024 is expected to exceed 10,000, a level not seen since the 2012–2013 financial year.
The Government’s most expansive promise, the ‘A Future Made in Australia’, is intended to invest in targeted industries with a view to making Australia an indispensable part of the global net zero economy. The Government has flagged this as a public-private partnership that drives forward renewable energy proposals in Australia.
Perhaps also consistent with the Government’s view that Australian futures should remain in domestic hands, measures that limit international enrolments in universities, along with a professed goal that 80% of working Australians are accredited in some form of tertiary education by 2050 make a sly appearance.
Despite the spending measures contained in the Budget, Treasurer Jim Chalmers has optimistically predicted that the Budget will drive a reduction in inflation to under 3% by the end of 2024 through measures such as energy relief payments and rent assistance. Time will show if this optimism is warranted.
In difficult economic circumstances, Irish Bentley is available to assist, and counsel the importance of taking early advice in relation to your business’ health.