tag:theconversation.com,2011:/ca/topics/budget-86/articlesBudget – The Conversation2024-03-13T11:31:58Ztag:theconversation.com,2011:article/2256652024-03-13T11:31:58Z2024-03-13T11:31:58ZJim Chalmers warns budget revenue upgrades will be modest but flags expected surplus<p>Treasurer Jim Chalmers will say lower commodity prices and a softening labour market mean this year’s revenue upgrade will be modest, when he outlines on Thursday the government’s strategy for the May 14 budget. </p>
<p>At the same time, Chalmers will all but confirm the budget will be in the black, declaring, “We are still shooting for a second surplus”. </p>
<p>He also will indicated the government is likely to bank a smaller proportion than previously of what revenue upgrade there is. In earlier budgets it banked almost all of it. This time, he says, “we’ll bank what we can” of the upgrade.</p>
<p>Chalmers’ first two budgets were each helped by revenue upgrades of more than $100 billion, but there won’t be any such bonanza this year. </p>
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Read more:
<a href="https://theconversation.com/grattan-on-friday-treasurer-jim-chalmers-prepares-a-new-growth-script-for-his-third-budget-225274">Grattan on Friday: Treasurer Jim Chalmers prepares a new 'growth' script for his third budget</a>
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<p>“In fact we are even looking at much less than the $69 billion we booked in the latest mid-year budget update,” Chalmers will tell a Committee for Economic Development of Australia function. </p>
<p>On the commodities front, the iron ore price has been falling. “In the last week alone it has fallen by almost 10% due to concerns about the demand for steel in China,” Chalmers says in his address, part of which was released ahead of delivery. Earlier this week, it was trading at less than $94 a tonne.</p>
<p>“Its current price is around 20% cent lower than it was this far out from last year’s budget.”</p>
<p>Thermal coal has been on the general path Treasury assumed in the December mid-year budget update. But its present price is about a third lower than this time last year.</p>
<p>The strong labour market contributed a good part of the revenue upgrades of the previous budgets. </p>
<p>Chalmers says while the labour market remains resilient, it is softening. “So we won’t get the very substantial revenue upgrades we’ve seen from outperforming expectations here.</p>
<p>"At the end of last year, there were 14.2 million Australians in work – this is around 500,000 more than Treasury was forecasting at the time of the election. </p>
<p>"We welcome this, but we don’t expect to get such upside forecast surprises this time around.”</p>
<p>Chalmers says the three biggest drivers of the government’s strategy for this budget are “global uncertainty, persistent cost of living pressures, and slowing growth”.</p>
<p>“These pressures necessitate an approach to the third budget which is a little bit different, but not a lot different, to the first two,” he says.</p>
<p>“There will still be a premium on what’s responsible, affordable, meaningful and methodical.</p>
<p>"There will still be a primary focus, but not a sole focus, on inflation.”</p><img src="https://counter.theconversation.com/content/225665/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In a speech to Committee for Economic Development of Australia Treasurer Jim Chalmers will say lower commodity prices and a softening labour market mean this year’s revenue upgrade will be modest.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2252742024-03-07T09:20:47Z2024-03-07T09:20:47ZGrattan on Friday: Treasurer Jim Chalmers prepares a new ‘growth’ script for his third budget<p>If Jim Chalmers were in television, he’d not just be the presenter and key producer of the show but the warm-up act as well. </p>
<p>May 14 – budget night – is the treasurer’s big occasion of 2024. He’s already publicly framing the script and getting out the early promos. </p>
<p>Chalmers gave an international audience a taste of the change in policy direction in his economic address when he was in Brazil at a G20 ministerial meeting last week. But it was in the wake of Wednesday’s December-quarter national accounts that we got a more detailed preview. </p>
<p>Ordinary people didn’t need the national accounts to tell them how things are in the Australian economy. Many know it through their own experience. They’ve responded, as the national accounts show, by cutting back on discretionary spending – for instance, by going to restaurants less. </p>
<p>Chalmers and his advisers had been holding their breath early this week, fearing the figures might show growth going negative, which could have been the first leg of a technical recession. There was a feeling of relief when encouraging export figures came out, signalling growth would fall on the positive side. </p>
<p>The growth figure came in at 0.2% for the quarter. Annually, it was 1.5% in the 12 months to December. That’s the lowest for more than two decades, leaving out the COVID period. </p>
<p>In light of minuscule growth and (on the upside) subsiding inflation, Chalmers is publicly throwing the switch to growth. In a cautious way, however, given he is (on his record so far) a conservative in budget matters. </p>
<p>Chalmers told his news conference: “Addressing inflation is still our primary concern, but these numbers show that the balance of risks in our economy are shifting from inflation to growth.”</p>
<p>That’s a green light for some more spending – but not a cash splash. </p>
<p>In deciding on the spending, the government is aware it does need to do more to alleviate the high cost of living. One area that it is considering is extra help for energy bills. </p>
<p>But Chalmers made it clear that, whatever extra is done, the reworked Stage 3 tax cuts, which don’t take effect until July 1, will be the big budget item to address cost of living. He also indicated the government isn’t contemplating additional income tax cuts. </p>
<p>In terms of spending generally, Chalmers nominated several areas where government spending could help growth without risking an increase in inflation. </p>
<p>These were the energy transformation, human capital (education, skills) and the care economy. </p>
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<p>We’d expect the government to provide incentives to encourage investment in clean energy. Prime Minister Anthony Albanese flagged this some weeks ago. </p>
<p>The United States has a huge fund to attract such investment. Albanese said the government has to be a partner in attracting investment. “We don’t have to go dollar-for-dollar in our spending, but we can go toe-to-toe on the quality and impact of our policies,” he said. </p>
<p>The budget is likely to make an early down payment on some proposals in Education Minister Jason Clare’s recently released universities accord. Some changes in the student loans scheme HELP and/or some financial assistance for student nurses and teachers on placements would be logical initiatives. </p>
<p>There will be pressure for some improvements in the welfare area. In 2022, Senate crossbencher David Pocock extracted (in return for his vote on industrial relations legislation) the PM’s agreement to set up an economic inclusion advisory committee, to report prior to each budget. </p>
<p>Before the 2023 budget, that group put forward ambitious recommendations for improving welfare benefits; it got only some of what it sought. Another set of bids is in the pipeline this year – these will be published at least a fortnight before the budget. </p>
<p>One area that remains an unknown is what will happen on aged care. The government has for months been sitting on a report from a group chaired by the Minister for Aged Care, Anika Wells, on the sustainability of aged care funding. It is likely to release the report as soon as next week, with the response later. One would expect the budget would have to begin addressing some of the report’s issues. </p>
<p>Aiming to keep budget expectations in check, Chalmers has warned the very large revenue upgrades that have marked his earlier budgets should not be anticipated this time. </p>
<p>Chalmers won’t yet say confidently there will be a budget surplus, only that it is “a reasonable chance”. But there is little doubt he has his mind set on delivering his second consecutive surplus.</p>
<p>Although budget planning is under way, most decisions are yet to be made. Ministers have put in their wish lists and these will be whittled down by the expenditure review committee. </p>
<p>The ERC comprises Albanese, Chalmers, Deputy Prime Minister Richard Marles, Senate leader Penny Wong, Finance Minister Katy Gallagher, Health Minister Mark Butler, Infrastructure Minister Catherine King, Communications Minister Michelle Rowland and Assistant Treasurer Stephen Jones. </p>
<p>It is a committee dominated by the economic ministers but with the voice of spending ministers represented there too.</p>
<p>But some ministerial discontent about this year’s ERC process has leaked out. </p>
<p>Nine newspapers have reported some ministers were “frustrated that key spending proposals are being rejected” by the government’s inner circle. Specifically, Industry Minister Ed Husic has objected to ministers being excluded from the room while the expenditure review committee discusses their proposals. </p>
<p>Spending ministers railing against economic ministers’ tight grip on the money is nothing new – it happens in governments of both hues. But it is notable that in this highly disciplined, tightly controlled administration, the angst has reached the media. </p>
<p>For Chalmers, this is a transition budget, which has to be crafted carefully, given the uncertain economic times. It won’t be the last of the political cycle. Albanese has flagged there is likely to be another budget, next March, before the election. </p>
<p>If Chalmers loosens the purse strings in May, he may need to have them open wider in 2025.</p><img src="https://counter.theconversation.com/content/225274/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>If Jim Chalmers were in television, he’d be the presenter, key producer and the warm-up act. The Budget might be two months away, but Chalmers is preparing us for his night in the spotlight.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2197992023-12-12T23:37:15Z2023-12-12T23:37:15ZBudget update forecasts deficit of $1.1 billion this financial year<p>The federal budget is headed for a small $1.1 billion deficit this financial year, according to the update released by Treasurer Jim Chalmers and Finance Minister Katy Gallagher on Wednesday morning. </p>
<p>This is an improvement of $12.8 billion compared to the deficit forecast in the May budget. </p>
<p>It suggests the final figure for the financial year might end up a surplus. If so, that would be the second year the Albanese government delivered a surplus. </p>
<p>Anxious to continue the fight against inflation, the government has not used the update to provide any cost-of-living relief or make new announcements. It has concentrated on improving the budget bottom line. </p>
<p>It has returned 92% of the upward revisions in revenue since the budget to the bottom line. </p>
<p>The Mid-Year Economic and Fiscal Outlook (MYEFO) shows deficits across all four years of the forward estimates. But over these years, the forecast underlying cash balance improves by a cumulative $39.5 billion compared to what was projected in the May budget. </p>
<p>Total receipts are projected to be $67.3 billion higher than the budget forecast. A strong labour market and high commodity prices have contributed to the improved revenue.</p>
<p>A further $9.8 billion has been identified in savings and reprioritisations since the budget. This has brought the total to nearly $50 billion since the election. A large part of the current savings comes from cuts and delays in the infrastructure program.</p>
<p>Net new spending since the budget is $650 million in 2023-24. </p>
<p>Chalmers and Gallagher said in a statement that in face of high but moderating inflation, high interest rates and global uncertainty the Australian economy was slowing. </p>
<p>“Growth is forecast to moderate in the near-term as these pressures weigh on domestic activity.” they said. </p>
<p>The economy is expected to grow by 1.75% in 2023-24 before regaining momentum in 2024-25, when improved real incomes are expected to support a recovery in household consumption. </p>
<p>While global oil prices have put upward pressure on inflation in the near-term, Treasury has not changed its forecast timetable for inflation’s return to the 2-3% target band. </p>
<p>The ministers said: “We know many Australians are doing it very tough, but welcome and encouraging progress is being made […] in the fight against inflation and in the economy more broadly”.</p>
<p>Unemployment, which was 3.7% in October, is forecast to rise to 4.25% by the end of this financial year. The unemployment forecast hasn’t changed since the budget.</p>
<p>Gross debt as a share of GDP is expected to peak at 35.4% of GDP in 2027-28, then decline to 32.1% by the end of the medium term.</p><img src="https://counter.theconversation.com/content/219799/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Mid-Year Economic and Fiscal Outlook (MYEFO) shows the federal budget is headed for a small $1.1 billion deficit this financial year, according to the update.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2161502023-10-23T01:57:40Z2023-10-23T01:57:40ZAs treasurer, Bill Hayden set Labor on the path to economic rationalism<figure><img src="https://images.theconversation.com/files/555172/original/file-20231023-29-obzcbl.png?ixlib=rb-1.1.0&rect=528%2C273%2C1270%2C603&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://recordsearch.naa.gov.au/SearchNRetrieve/Interface/DetailsReports/PhotoDetail.aspx?Barcode=11881127">National Archives of Australia</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Former Labor leader and governor-general Bill Hayden, whose death was announced <a href="https://www.smh.com.au/national/bill-hayden-dies-aged-90-20231021-p5ee02.html">on Saturday</a>, is rightly being remembered for introducing Australia’s first universal healthcare scheme <a href="https://www.theage.com.au/national/the-health-scheme-that-sickened-doctors-20040101-gdx1dn.html">Medibank</a>, which lives on today as <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1617/Quick_Guides/Medicare">Medicare</a>.</p>
<p>Less well known is his brief but important role as Australia’s treasurer in 1975. It was five months in which he set Labor, and ultimately Australia, on the path to what became known as economic rationalism.</p>
<h2>‘Why is he so interested in economics?’</h2>
<p>Unexpectedly winning the Queensland seat of Oxley for Labor from the Menzies Coalition government at the young age of 28 in 1961, the former policeman thought about studying law at the University of Queensland but chose economics instead because he believed it was <a href="https://catalogue.nla.gov.au/catalog/999763">more likely to transform society</a>.</p>
<p>His 1968 booklet, <a href="https://catalogue.nla.gov.au/catalog/2577167">The Implications of Democratic Socialism</a>, was ahead of its time in advocating both a national health scheme “with free hospitalisation” and a <a href="https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22hansard80%2Fhansardr80%2F1968-08-22%2F0059%22">national superannuation scheme</a>. It sold 5,000 copies.</p>
<p>But his interest in economics was not always appreciated within his own party.</p>
<p>Labor leader from 1960 to 1967 Arthur Calwell <a href="https://catalogue.nla.gov.au/catalog/1391780">once asked</a> </p>
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<p>why does young Hayden keep raising the problem of the balance of payments? Why doesn’t he just be like a normal politician and worry about his electorate? </p>
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<h2>Understudy, then Treasurer</h2>
<p>Calwell’s replacement, Gough Whitlam, considered appointing Hayden treasurer when he won the 1972 election. Instead he appointed Frank Crean in recognition of Crean’s long service as shadow treasurer, and added Hayden to Cabinet’s economic committee, where he was referred to as “<a href="https://catalogue.nla.gov.au/catalog/863573">Crean’s understudy</a>”.</p>
<p>Hayden served as acting treasurer <a href="https://www.mup.com.au/books/the-money-men-paperback-softback">nine times</a>. In this role he became an irritant to Whitlam, warning of the risks of expanding government spending too quickly and arguing for tax increases in contravention of Whitlam’s policy speech.</p>
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<a href="https://images.theconversation.com/files/555171/original/file-20231023-25-5ui45d.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/555171/original/file-20231023-25-5ui45d.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/555171/original/file-20231023-25-5ui45d.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=965&fit=crop&dpr=1 600w, https://images.theconversation.com/files/555171/original/file-20231023-25-5ui45d.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=965&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/555171/original/file-20231023-25-5ui45d.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=965&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/555171/original/file-20231023-25-5ui45d.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1212&fit=crop&dpr=1 754w, https://images.theconversation.com/files/555171/original/file-20231023-25-5ui45d.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1212&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/555171/original/file-20231023-25-5ui45d.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1212&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Hayden investigated floating the dollar a decade before the Hawke government did it.</span>
<span class="attribution"><a class="source" href="https://recordsearch.naa.gov.au/SearchNRetrieve/Interface/DetailsReports/PhotoDetail.aspx?Barcode=203086072">National Archives</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<p>Hayden also investigated <a href="https://catalogue.nla.gov.au/catalog/863573">floating the dollar</a> (a decade before the Hawke government did it) but found the treasury and the Reserve Bank unenthusiastic. </p>
<p>In June 1975, with Medibank bedded down, Whitlam finally made Hayden treasurer.</p>
<p>Hayden set about repairing relations with the treasury which had become very strained under Crean’s first replacement <a href="https://www.researchgate.net/publication/281976674_Jim_Cairns_The_Dreamer">Jim Cairns</a>. </p>
<p>Perhaps more than any treasurer since <a href="https://treasury.gov.au/publication/economic-roundup-issue-1-2010/economic-roundup-issue-1-2010/ted-theodore-the-proto-keynesian">Ted Theodore</a>, Hayden had his own views on economics and was keen to engage with treasury officials and then present the resulting position <a href="https://catalogue.nla.gov.au/catalog/1391780">forcefully</a> in Cabinet.</p>
<p>Hayden was pessimistic about Labor being re-elected, but he believed he could limit its time in opposition to <a href="https://catalogue.nla.gov.au/catalog/1391780">one or two terms</a>. </p>
<p>His August 1975 budget was constructed at a time when inflation was <a href="https://www.datawrapper.de/_/WV21a/">almost 18%</a>, which he described as Australia’s “<a href="https://cdn.theconversation.com/static_files/files/2876/Hayden_1975_budget_speech.pdf">most menacing enemy</a>” </p>
<h2>Fighting inflation, carefully</h2>
<p>“We are no longer operating in that simple Keynesian world in which some reduction in unemployment could, apparently, always be purchased at the cost of some more inflation”, Hayden declared, breaking with decades of orthodoxy.</p>
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<p>Today, it is inflation itself which is the central policy problem – more inflation simply leads to more unemployment.</p>
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<p>His <a href="https://cdn.theconversation.com/static_files/files/2876/Hayden_1975_budget_speech.pdf">first and only budget</a> slashed the rate of growth in government spending, called for restraint in wages growth, cut the rate of company tax and simplified the personal income tax scale.</p>
<p>But Hayden also made it clear he wasn’t going to tighten government spending in ways that would hurt people, saying he rejected</p>
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<p>a policy of deliberately creating massive unemployment and widespread business failures in order to stop inflation abruptly.</p>
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<p>Coalition staffers later said they had <a href="https://www.google.com.au/books/edition/The_Whitlam_Legacy/-2BInQEACAAJ?hl=en">been concerned</a> that Hayden’s appointment as treasurer would “make it possible for Labor to get control of economic policy”.</p>
<p>It might have accelerated their decision to take measures that led to the dismissal of the Whitlam government in November 1975.</p>
<p>After refusing to pass Hayden’s budget between August and November 1975, the Coalition adopted its measures unaltered on taking office.</p>
<h2>Labor’s first economic rationalist</h2>
<p>In subsequent years, parliamentary journalists Michelle Grattan, Robert Haupt and Greg Hywood described Hayden as perhaps the <a href="https://catalogue.nla.gov.au/catalog/635729">father</a> of economic rationalism in the Australian Labor Party.</p>
<p>By that they meant recognising that competitive markets and a stable and growing economy could deliver outcomes as useful to Labor as government intervention.</p>
<p>In one of his last acts as Labor leader before being toppled by Bob Hawke in February 1983 Hayden appointed Paul Keating as shadow treasurer.</p>
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<a href="https://theconversation.com/bill-haydens-remarkable-contribution-to-public-life-95853">Bill Hayden's remarkable contribution to public life</a>
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<p>“The policy coherence that has given Australia its quarter century of uninterrupted growth, began its long coalescence the day Bill Hayden convened his first shadow cabinet meeting,” Keating said of Hayden’s time as Labor leader <a href="http://www.paulkeating.net.au/shop/item/the-hayden-oration">four decades later</a>.</p>
<p>On Sunday, in remarks echoed by the current treasurer <a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/statement-passing-bill-hayden">Jim Chalmers</a>, Keating again <a href="https://johnmenadue.com/death-of-bill-hayden-a-statement-from-paul-keating/">paid tribute</a> to Hayden’s contribution.</p>
<p>He said the economic personnel Hayden put in place were “the building blocks the Hawke Government relied upon to shift the country’s policy to the economic rationalism which has since made Australia so flexible and so wealthy”.</p><img src="https://counter.theconversation.com/content/216150/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hawkins formerly worked in the Australian Treasury where he wrote a series of biographical essays on Australian treasurers.</span></em></p>Hayden investigated floating the dollar a decade before Labor did it, and he cut taxes and slashed spending growth, putting Labor on a new course.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2148612023-10-10T14:53:23Z2023-10-10T14:53:23ZBattling to make ends meet? Financial planning expert offers 5 tips on how to build your budget<p>Every day seems to bring new headlines about rising costs. <a href="https://www.news24.com/news24/africa/news/nigerias-big-unions-call-indefinite-strike-over-fuel-prices-and-the-cost-of-living-20230926">In Nigeria</a>, unions are threatening to strike amid soaring fuel prices; the country’s inflation rate <a href="https://www.cbn.gov.ng/rates/inflrates.asp">hit 25%</a> in August. The amount it costs to fill a food basket in South Africa <a href="https://pmbejd.org.za/wp-content/uploads/2023/09/PMBEJD_Key-Data_September-2023_27092023.pdf">keeps climbing</a>. Ghanaians <a href="https://www.reuters.com/world/africa/multi-day-protests-over-economic-crisis-grip-ghanas-capital-2023-09-23/">took to the streets</a> of Accra in late September to protest about the cost of living.</p>
<p>A <a href="https://www2.deloitte.com/us/en/insights/industry/retail-distribution/consumer-behavior-trends-state-of-the-consumer-tracker.html">recent study by the audit and consulting firm Deloitte</a> found that 75% of South Africans were concerned that the prices for everyday purchases would continue to increase, while 80% of consumers across all income groups expected the prices of groceries, household utilities and fuel to rise. </p>
<p>This stark reality means budgeting may be more necessary than ever.</p>
<p>If you don’t know how to create a budget, then you shouldn’t feel bad – most adults aren’t taught how to create one. And most people don’t budget, because they see it as restrictive or unsustainable. But it need not be: once you appreciate that a budget can work for you, it can be a financially empowering exercise. It’s a cornerstone of financial planning because it ensures you are living within your means and helps you remain in financial control.</p>
<p>As a financial planning academic, I focus in <a href="https://researchprofiles.canberra.edu.au/en/persons/bomikazi-zeka/publications/">my research</a> on improving financial wellbeing and promoting savings behaviours through interventions such as budgeting. Here are five guidelines for creating a budget.</p>
<h2>1. Apps vs spreadsheet</h2>
<p>A good place to start is to choose the format of how you’re going to budget. There are several <a href="https://www.sanlamreality.co.za/wealth-sense/setting-up-a-family-budget-that-works/">online templates</a> and apps you can use for budgeting. For instance, <a href="https://www.22seven.com/">22Seven</a> has gained popularity in South Africa due to its compatibility with several financial institutions, including the country’s big five banks. Similarly, <a href="https://www.the-star.co.ke/business/kenya/2021-01-25-budgeting-using-mint-app/">Mint</a> is a popular budgeting tool that is used in Kenya and Nigeria. </p>
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Read more:
<a href="https://theconversation.com/are-you-financially-literate-here-are-7-signs-youre-on-the-right-track-202331">Are you financially literate? Here are 7 signs you're on the right track</a>
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<p>If you prefer to put pen to paper, some online templates come with <a href="https://www.wonga.co.za/blog/free-budget-template">free printable budgets</a>. Creating your own <a href="https://create.microsoft.com/en-us/learn/articles/how-to-make-excel-budget">Excel spreadsheet</a> is an equally good approach. </p>
<p>What matters most is using a tool that you can commit to.</p>
<h2>2. Itemising your income and expenses</h2>
<p>A budget essentially shows how much you’re spending in relation to how much you’re earning. So once you have selected your budgeting tool, you need to fill in your income and itemise how much you’re spending on each expense in a month. A budget can be considered a cashflow statement because it allows you to track money coming in (income) and money going out (expenses). </p>
<p>If you are living within your means, your budget should indicate a surplus – more cash inflows than cash outflows. So budgeting provides an accurate account of your short-term financial position.</p>
<h2>3. A realistic account of expenses</h2>
<p>When you look at your financial statements, fill your expenses into your budget honestly and accurately. Don’t cheat! Since everyone’s financial situation is different, your budget will also be unique. </p>
<p>Even though there is no one-size-fits-all approach to budgeting, it should still consider all of your expenses (both regular and intermittent). A general rule of thumb is that if it’s deducted from your account then you should treat it as an expense. This includes payments for housing, medical insurance, fuel, dining out, credit card repayments and even bank fees.</p>
<h2>4. Save first, spend later</h2>
<p>Now you’ve seen how much you’re spending. Either it’s too much – and you can plan where to cut back – or you have savings at the end of the month.</p>
<p>When compiling your budget it’s important to demarcate how much will be in the form of savings. What’s more important is getting into the habit of saving before you spend instead of saving after spending. If you spend first then you’ve deprived yourself of the opportunity to save for a rainy day. </p>
<p>Furthermore, <a href="https://eprints.hud.ac.uk/id/eprint/10231/1/Microsoft_Word_-_submitted_version_3rd_June_201.pdf">research</a> has shown that getting into the habit of saving has a transgenerational effect: it can be considered a cultural value that is passed on from one generation to another. So think of saving as paying yourself first. Once you have done so, you won’t feel guilty for treating yourself because you’ve already done the financially responsible thing by putting your savings aside.</p>
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Read more:
<a href="https://theconversation.com/kids-and-money-five-ways-to-start-the-conversation-193632">Kids and money: five ways to start the conversation</a>
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</em>
</p>
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<h2>5. Considering assets and liabilities</h2>
<p>Once you’ve become comfortable with consistently budgeting, you can take it up a notch by including your assets (everything you own with an economic value) and liabilities (everything you owe) to determine your overall financial position. </p>
<p>You can get a clearer picture of your overall financial wellbeing by compiling a list of all your assets, for example your savings and <a href="https://www.investopedia.com/terms/h/home_equity.asp">home equity</a>, in relation to liabilities (such as bank loans). Knowing your long-term financial position can indicate how financially resilient or vulnerable you are. In the event of a financial emergency, you will know which resources you can draw upon to meet an unexpected expense.</p>
<p>By creating a budget (and sticking to it), you can protect yourself and your household from financial shocks. Consider the alternative. Imagine you haven’t budgeted and set savings aside. If a financial emergency were to arise, your next best bet would be to borrow the funds you need. You’d have to come up with a plan to repay what you’d borrowed while also building your savings.</p>
<h2>A healthy habit</h2>
<p>Getting into the habit of budgeting isn’t easy, especially if you haven’t done it before or you’re intimidated by the process. But, as the expression goes, “a journey of a thousand miles begins with a single step”. Think of budgeting as taking a small but important step towards reclaiming control over your finances and improving your financial well-being.</p><img src="https://counter.theconversation.com/content/214861/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bomikazi Zeka does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Once you appreciate that a budget can work for you, it can be a financially empowering exercise.Bomikazi Zeka, Assistant Professor in Finance and Financial Planning, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2139382023-09-27T19:56:29Z2023-09-27T19:56:29ZGOP shutdown threat is the wrong way to win a budget war − history shows a better strategy for reducing the deficit<figure><img src="https://images.theconversation.com/files/549427/original/file-20230920-19-i4o0j8.jpg?ixlib=rb-1.1.0&rect=25%2C0%2C5725%2C3837&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Past as prologue: October could bring yet another government shutdown.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/united-states-capitol-building-washington-dc-with-royalty-free-image/1094765660">Jorge Villalba/iStock via Getty Images</a></span></figcaption></figure><p>Congress has just days to keep the federal government from grinding to a halt, and a last-minute deal seems increasingly unlikely. The problem is that lawmakers <a href="https://theconversation.com/congress-needs-to-pass-12-funding-bills-in-11-days-to-avert-a-shutdown-heres-why-that-isnt-likely-212520">need to pass a dozen appropriations bills</a> – or a single continuing resolution – by Sept. 30, 2023, in order to keep the government’s lights on. But a key group of House Republicans is refusing to pass anything without steep <a href="https://www.washingtonpost.com/politics/2023/09/26/inside-spending-cuts-house-republicans-are-fighting/">spending cuts</a>. No bills, no government – at least for <a href="https://theconversation.com/what-happened-during-the-last-government-shutdown-4-essential-reads-169003">a few days or weeks</a>, anyway. </p>
<p>While fiscal discipline has long been the <a href="https://www.washingtonpost.com/business/2023/09/24/government-shutdown-congress-budget/">rallying cry</a> for shutdown supporters, the tactic isn’t necessarily effective at reducing the government’s deficit. </p>
<p>I’ve been following efforts to shut down the U.S. government for one reason or another for more than 40 years, first from various perches at the Congressional Budget Office, then at the National Governors Association, and now as a <a href="https://www.linkedin.com/in/raymond-scheppach-19b98536">professor of public policy</a>. History shows that shutdowns are counterproductive – at least as measured by their own defenders’ goals. Fortunately, the past also provides a proven way to reduce the deficit, which I agree is a laudable goal.</p>
<h2>Deficits are too high</h2>
<p>When House Republicans say America’s finances are in bad shape, they do have a point. The deficit, currently estimated at <a href="https://www.cbo.gov/topics/budget/outlook-budget-and-economy">US$1.5 trillion</a>, and debt held by the public, estimated at $25.8 trillion, are both dangerously high.</p>
<p>Why is the status quo so risky? For one thing, large deficits are inflationary and put pressure on the Federal Reserve to raise interest rates. For another, interest on public debt is now estimated to be <a href="https://www.cbo.gov/publication/58848">$663 billion</a> a year, which is slightly over 10% of total spending – a huge fiscal burden.</p>
<p>Finally, and most importantly, at some point individuals and foreign countries may <a href="https://theconversation.com/us-debt-default-could-trigger-dollars-collapse-and-severely-erode-americas-political-and-economic-might-198395">dump U.S. treasury bills</a> and bonds on the market because of a loss in confidence. That would make interest rates spike and could create a major economic collapse.</p>
<p>Because of these risks, members of the House Freedom Caucus have threatened to shut down the federal government on Oct. 1, the beginning of the next fiscal year, if they aren’t able to get big cuts to domestic discretionary spending. </p>
<p>Negotiations are further complicated by some House Republicans’ desires to add riders about the border and culture war issues to the must-pass spending bills, as well as the Biden administration’s request for <a href="https://www.reuters.com/world/us/biden-asks-us-congress-40-billion-including-24-billion-ukraine-2023-08-10/">$24 billion for Ukraine</a>, which not all party members support. </p>
<h2>Fighting the wrong battle</h2>
<p>I would argue that now is the wrong time for Republicans to take a stand on reducing the deficit, for two reasons. </p>
<p>First of all, shutdowns don’t get results. The U.S. has had 21 shutdowns over the past five decades, three of which have been major. These have all caused real harm to the U.S. economy, but they haven’t led to the spending levels Republicans wanted. </p>
<p>What’s more, in each case, the public <a href="https://fivethirtyeight.com/features/government-shutdown-polls/">blamed Republicans</a> for the shutdowns, polls show. Some historians have even suggested that the fallout from the weekslong 1995-96 shutdown contributed to then-speaker <a href="https://www.nytimes.com/1998/11/07/us/the-speaker-steps-down-the-career-the-fall-of-gingrich-an-irony-in-an-odd-year.html">Newt Gingrich having to resign</a> in 1998.</p>
<p>Second, the cuts Republicans are seeking aren’t all that significant. The bottom line is that they’re ignoring national defense and mandatory spending, which together represent <a href="https://www.cbo.gov/system/files/2023-02/58848-Outlook.pdf">75% of total spending</a>. The current effort aims only to trim domestic discretionary spending, which makes up a small and shrinking slice of the federal-spending pie – less than 15% in 2023.</p>
<p>At the same time, mandatory spending, including entitlements, totals nearly <a href="https://www.cbo.gov/system/files/2023-02/58848-Outlook.pdf">$4 trillion annually</a> and is growing rapidly. So, even if Democrats agreed to the domestic discretionary-spending cuts advocated by the House Freedom Caucus, those savings would be overtaken by growth in entitlement spending – primarily Social Security, Medicare and Medicaid – within a year. </p>
<p>What’s more, any serious plan to reduce the federal deficit must consider increasing the <a href="https://www.cbpp.org/research/federal-budget/where-do-our-federal-tax-dollars-go">$4.8 trillion of federal revenue</a>. The House Freedom Caucus has expressed no interest in raising taxes. </p>
<p>The bottom line, in my view, is that the shutdown strategy is more about creating drama, publicity and campaign fundraising for certain lawmakers than it is about seriously reducing the deficit. </p>
<h2>How to get results</h2>
<p>While it’s never politically easy to cut entitlements or raise taxes, the reconciliation provision in the <a href="https://www.govinfo.gov/content/pkg/COMPS-10356/pdf/COMPS-10356.pdf">1974 Congressional Budget and Impoundment Control Act</a> was enacted specifically for this purpose. It allows entitlement cuts and tax increases to be incorporated into the same bill, which cannot be filibustered in the Senate and only needs a majority for passage.</p>
<p>Over the past 40 years, there have been six serious budget negotiations that resulted in deficit reductions. One in 2011, negotiated by then-President Barack Obama and House Majority Leader John Boehner, was likely the <a href="https://manhattan.institute/article/getting-to-yes-a-history-of-why-budget-negotiations-succeed-and-why-they-fail">most successful</a> from a fiscal perspective. When it was finally enacted, it generated $1.95 trillion in deficit reduction over nine years. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/550083/original/file-20230925-17-z6u5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="In a 2011 photograph, Barack Obama and John Boehner are seen in sitting at a table at Cabinet Room of the White House. Boehner has a slight smile; Obama, about to speak, has an expression of satisfaction." src="https://images.theconversation.com/files/550083/original/file-20230925-17-z6u5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/550083/original/file-20230925-17-z6u5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=407&fit=crop&dpr=1 600w, https://images.theconversation.com/files/550083/original/file-20230925-17-z6u5k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=407&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/550083/original/file-20230925-17-z6u5k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=407&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/550083/original/file-20230925-17-z6u5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=512&fit=crop&dpr=1 754w, https://images.theconversation.com/files/550083/original/file-20230925-17-z6u5k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=512&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/550083/original/file-20230925-17-z6u5k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=512&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">House Minority Leader Nancy Pelosi, House Speaker John Boehner, U.S. President Barack Obama and Senate Majority Leader Harry Reid discuss the budget and debt limit during negotiations at the White House on July 11, 2011.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/president-barack-obama-meets-with-house-minority-leader-rep-news-photo/118825556">Roger Wollenberg/Getty Images</a></span>
</figcaption>
</figure>
<p>A similarly successful negotiation came <a href="https://media4.manhattan-institute.org/sites/default/files/R-0619BRdl.pdf">in 1997</a> during the Clinton administration. Lawmakers cut national defense spending by $247 billion, nondefense discretionary spending by $273 billion and entitlements by $374 billion, with interest savings of $142 billion. They also reduced taxes by $220 billion, mostly for low-income individuals, which brought the net total to $816 billion in deficit reduction over 10 years. </p>
<p>In addition to those successes, there were four other negotiations in 1993, 1990, 1985 and 1983 that averaged over $400 billion in deficit reduction, albeit over different timelines. </p>
<p>These examples show that budget negotiations without threatening a shutdown can be effective at enacting major deficit-reduction plans into law. The one during the Clinton administration even led to the budget surpluses in the years from 1998 to 2001, the <a href="https://clintonwhitehouse4.archives.gov/WH/New/html/19981028-13004.html">first surpluses since 1969</a>. </p>
<p>History indicates that there are three major requirements for a successful budget negotiation. First, lawmakers must be seriously committed to the goal of deficit reduction. Second, everything needs to be on the table, including revenues, entitlements and national defense. Third, there must be trust among the negotiators. </p>
<p>Unfortunately, I don’t believe any of these requirements can be met today.</p><img src="https://counter.theconversation.com/content/213938/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Raymond Scheppach does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Shutting down the government won’t help reduce the deficit. Here’s what would.Raymond Scheppach, Professor of Public Policy, University of VirginiaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2054312023-05-10T12:44:16Z2023-05-10T12:44:16ZThe day after the night before - Chalmers and Taylor on the budget<p>Will the budget make inflation worse? Are its boosts to welfare payments just the first step for the Labor government? Could the projected one-off surplus be followed by another one or more? What (if any) of the budget measures will the Coalition oppose? There’s quite a bit about this budget that, as the saying goes, “only time will tell”. </p>
<p>In this podcast, Treasurer Jim Chalmers defends his budget from those economists who claim it will be inflationary, and strongly rejects suggestions it doesn’t have much for middle income Australians struggling with rising mortgage payments. Chalmers also promises that, given the current tight labour market, a priority in coming months will be finding ways to help more of the long-term unemployed into jobs. </p>
<p>Shadow treasurer Angus Taylor lists some of the measures the opposition supports but will not commit on the changes to the Petroleum Resource Rent Tax, despite the sector’s benign attitude to the cautious revamp.</p>
<hr>
<p>E&OE TRANSCRIPT
PODCAST INTERVIEW
THE CONVERSATION
THURSDAY, 11 MAY 2023</p>
<p>SUBJECTS: May Budget, inflation, interest rates, cost of living, NDIS, Petroleum Resource Rent Tax, JobSeeker, welfare increases, stage three tax cuts, surplus, labour market.</p>
<p>MICHELLE GRATTAN, HOST: Jim Chalmers, the economic argument about this Budget has come down to whether it will or will not add to inflation. A number of economists say it will, but you strongly reject that. Can you just take us through briefly your argument about why those economists are wrong.</p>
<p>JIM CHALMERS, TREASURER: Well, first after all there’s a lot of economists who have my view, including the considered advice of the Treasury. And the reason for that is because what we’ve done is we’ve designed the cost-of-living package in particular, to be particularly cognisant of the inflationary pressures in the economy. It’s spread out over four years – not all of the money hits the economy at once. And if you think about the next year, which is the year that the Opposition is focused on, a big chunk of the money we’re spending next year is the funding for the programs which are obviously ongoing but weren’t funded in an ongoing way. There’s also the impact of the small business tax breaks and some other reasons. So, overall, our Budget is designed to take some of the edge off these cost-of-living pressures, not add to the inflationary pressures in the economy, and you can see that in the Treasury’s forecasts.</p>
<p>GRATTAN: So you’re confident that the Reserve Bank will think that you’ve helped it, not hindered it in its push to contain inflation?</p>
<p>CHALMERS: Well, I’m always careful, as you know, Michelle, I don’t want to put words in the Reserve Bank Governor’s mouth in particular, they take their decisions independently. But obviously I wouldn’t be handing down a Budget that made their job more difficult. And in the context of the energy plan, the energy relief payments and some of the other measures in the Budget, we’re going out of our way to make their job easier.</p>
<p>GRATTAN: Now, in the Budget you’ve increased JobSeeker and related payments by a small amount. Do you see this as a first step only in raising these payments? You know you’ll have more advocacy from your inclusion advisory group next year, because that’s an ongoing exercise?</p>
<p>CHALMERS: Two quick things about that, I mean, first of all, having just handed down a Budget with an increase to the base rate of JobSeeker and the associated payments - and I’m not flagging what we might do in 364 days’ time in the next Budget or whenever it is - but the second point I’d make is that as a Labor government – and the Prime Minister makes this point repeatedly – we’re always looking to do what we can to help people, but we do that within the constraints of a really responsible Government and a really responsible Budget. And I think the overwhelming story out of this Budget is the fact that we’ve been able to be responsible and compassionate at the same time.</p>
<p>GRATTAN: Now, of course, we always seem to return to the stage three tax cuts. We’ve had two Budgets now where there’s been pressure, to which the Government hasn’t responded, to refashion those tax cuts. I know you say you’ve got no plans to do this, but can we take this as a never-ever pledge – that they’re definitely here to stay?</p>
<p>CHALMERS: Well, the point that I would make about that, Michelle, is similar to the point I’ve made all the other times I’ve been asked, including at the National Press Club after the Budget – and that is, changing these tax cuts wasn’t even part of our deliberations in this Budget. And our position hasn’t changed. That’s why the Budget doesn’t reflect any change. And they come in in more than a year’s time, but it hasn’t been something that we’ve been contemplating. I get asked from time to time from both directions – people want me to either guarantee it or they want me to say that they we will abolish them. We haven’t changed our position despite all the pressure coming at us from both directions. We think it’s important that you return bracket creep, particularly for people on lower and middle incomes - I said that at the Press Club as well. And we need to remember that these tax cuts kick in 45 grand, and we’ve always supported tax relief for people on modest incomes.</p>
<p>GRATTAN: You’d always have the option of going to an election to promise to do something later, of course.</p>
<p>CHALMERS: I’m not speculating about that. We haven’t changed our position. We’ve got a Budget which has done as much as we can, frankly, for the most vulnerable people, the people on the lowest incomes, and I’m proud of that.</p>
<p>GRATTAN: You’ve been a bit sensitive today when people have pointed out that the Budget doesn’t have anything particularly special for middle-income, mortgage-stressed people. Why do you refute that proposition?</p>
<p>CHALMERS: I don’t feel like I’m especially sensitive about it, but I do think it’s complete and utter rubbish. And the reason I think that is because we’ve been really careful in prioritising the most vulnerable. We haven’t neglected middle Australia. For example, big changes to bulk billing, a centrepiece of the Budget. A lot of people with kids under 16 will benefit from that right up and down the income scale. Cheaper early childhood education. We’ve actually copped a lot of flak for being too kind to middle Australia in our early childhood policies. They kick in on the 1st of July. Energy efficiency measures, the training package, the home guarantee, there’s a whole bunch – there are a whole bunch of policies in the Budget for middle Australia. It’s just that the focus of a lot of the commentary has been what we’re doing for the most vulnerable people. That’s a good thing from my point of view, we are doing what we can there but that doesn’t mean we’re neglecting middle Australia.</p>
<p>GRATTAN: The Budget forecasts some $15 billion in savings from the National Disability Insurance Scheme. That’s a big amount of money. What will be involved, and do you think people on the scheme will be alarmed, because this is a particularly delicate area for obvious reasons?</p>
<p>CHALMERS: Look, it is. I acknowledge that. And that’s why both in the Budget speech and in the speech the following day I’ve gone out of my way to say that our objective here – our number one objective – is to make sure that people are getting the care that they need and deserve and that was intended when we designed the scheme in the first place. But we need to get a handle on some of these increasing costs in the system. And Bill Shorten has been doing a terrific job working with the NDIA and the sector and others, and Anthony Albanese with the state and territory leaders to try and moderate the growth in the program, not because we want to cut it for its own sake but because we want to make sure we’re getting value for money for people who need it and rely on it.</p>
<p>GRATTAN: But you’re pointing to these savings, and that inquiry into the scheme hasn’t even reported – won’t report for a few months yet.</p>
<p>CHALMERS: But, I mean, as you would appreciate from – you know, you would have seen some of these processes before, there’s often kind of iterations, there’s often engagement with the review panel as it continues its work. And what we saw – what we would have seen in the Budget is about a $17 billion increase in the cost of the NDIS. There’s about $15 billion of savings that were able to be found to moderate that growth.</p>
<p>GRATTAN: That’s pretty huge.</p>
<p>CHALMERS: Well, I think it shows –</p>
<p>GRATTAN: 15 out of 17.</p>
<p>CHALMERS: Well, I think it shows that if you put the effort into it, making sure that every dollar goes to the people who need it in the scheme, you can make the scheme more sustainable. You can put it on a more sustainable footing. That’s what I want to see, because I believe in the NDIS. I want it to be here to stay, and in order for it to be here to stay we’ve got to moderate some of these costs.</p>
<p>GRATTAN: As Treasurer you give the impression that you’ve been much influenced by working for a Treasurer. And as a staffer, of course, you went through the Labor Government’s trauma with its resources tax. In undertaking changes announced in this Budget to the Petroleum Resource Rent Tax, you treated the sector really very much with kid gloves. You’ve engaged with that industry. How much were you influenced by your own experience before?</p>
<p>CHALMERS: I think everybody is in one way or another. I like to think that I’ve got my eyes forward in the job that I want to do and not trying to –</p>
<p>GRATTAN: But you’ve got a few scars from the past.</p>
<p>CHALMERS: I think everyone does, from their own experiences. I don’t want to pretend that I haven’t learned a lot in that pretty remarkable apprenticeship that I was fortunate to have. I mean, nobody’s come to this job –</p>
<p>GRATTAN: Don’t mention tax inquiry.</p>
<p>CHALMERS: Well, nobody’s come to this job with the kind of apprenticeship that I had for it, and I’m grateful for that. And most days I reflect on something I’ve learned, as people would in all walks of life in their work. But I try and look forward. I want to make my time in this job really count, and one of the things that I’m pleased about in extracting $2.4 billion of extra tax sooner out of offshore LNG projects -yes I went about it in a consultative way, that’s the tone that Anthony Albanese sets for his Government. That’s his expectations of us. If you can get a good outcome from working with people rather than against them, then I would have thought the onus is on all of us in all of our portfolios to try.</p>
<p>GRATTAN: Now, you’re celebrating a surplus for this financial year, although there are a couple of months to go.</p>
<p>CHALMERS: You won’t be seeing any Back in Black mugs or anything from me, Michelle, or any self-congratulation. There’s good reasons to be cautious.</p>
<p>GRATTAN: Just fingers crossed. But the Budget then projects deficits in the later years. But I’m just wondering whether there might be, not a trick here, but some optimism that’s not reflected in those figures – in other words, is it not possible, certainly next financial year, that with the savings, with the stream of revenue that’s still to come you could, in fact, get a surplus next financial year?</p>
<p>CHALMERS: Well, I’m not prepared to pre-empt that, and I don’t want to get ahead of ourselves. And I think there are genuinely good reasons to be cautious and careful and conservative, including, the history of my immediate predecessor that I just joked about. There is no point over promising and under delivering here. I’d rather avoid that.</p>
<p>GRATTAN: But you might over-deliver after the under-promising?</p>
<p>CHALMERS: Well, it remains to be seen what happens with the labour market, what happens with commodity prices and a range of other influences on the Budget. But I think there’s a good reason to be cautious and conservative, and that’s what I’m being.</p>
<p>GRATTAN: Now, I just want to finish on the labour market, and something that I asked you earlier at the Press Club, because I think it’s important and something our listeners would be interested in. The Budget does not focus much attention, even with this tight labour market, on getting the long-term unemployed into jobs. What priority are you giving this? What more can you do about it? And what’s your thinking ahead?</p>
<p>CHALMERS: Yeah, very important priority; very, very high on our list. And one of the reasons I’m so proud of the place-based initiatives for communities where we’ve had entrenched disadvantage and intergenerational long-term unemployment is we need to think differently about the communities, frankly, like the one I grew up in and the one that I represent now.</p>
<p>GRATTAN: Just explain that place-based community program.</p>
<p>CHALMERS: So there are programs around Australia which find the communities with a lot of disadvantage and they try and apply a hyperlocal approach with great local leaders backed by the Commonwealth Government to try and break the cycle of intergenerational disadvantage. And it involves the philanthropic sector, it involves all of the community organisations, support from all three levels of government. And what I’ve seen in my own community, a program called Logan Together and a guy called Matthew Cox, who’s been central to all my thinking on this, is if we get a good model and we can apply it to other communities like Logan around Australia, we give ourselves a chance of breaking this cycle so that we have fewer long-term unemployed people. And so we intervene early in people’s lives and all of these sorts of things that are really important. So that’s part of the thinking. You’ve asked me before about employment services. That’s important too. Surely we can do better there. I mean, surely. And so we’ve got an Employment White Paper. My colleague Julian Hill and others are doing a heap of work at the committee level to see if we can do that better. Tony Burke is in charge of that as the Employment Minister, and so I’d happily work very closely with him to see if we can make improvements there. But I think the overall objective is really important. When we’ve got unemployment three and a half per cent, even if it gets to four and a half per cent on the Budget forecasts, we need to do a much better job of actually hooking people up with the opportunities of a growing job-creating economy. Employment services, the Employment White Paper, the place’s based programs, the participation agenda we have around early childhood education, all of these things are important. We’ve done a heap of work, but there will be more to do.</p>
<p>GRATTAN: Jim Chalmers, thanks very much for talking with us today.</p>
<p>CHALMERS: Thanks for the opportunity, Michelle.</p>
<p>ENDS</p>
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<p>TRANSCRIPT
INTERVIEW WITH MICHELLE GRATTAN,
THE CONVERSATION
Wednesday 10th May 2023
Topics: Budget 2023
E&OE </p>
<p>MICHELLE GRATTAN: Angus Taylor, you’ve condemned this as a high taxing, high spending Labor budget, to what degree and where should the taxing and spending have been lower?</p>
<p>ANGUS TAYLOR: Well, can we start with the facts because it’s very important to understand the baseline here. Labor’s added $185 billion of spending since they got into government and crucially, in the new initiatives they’re pursuing. There’s $2 of spending for every dollar of revenue. And so, at a time when we need a budget that’s responsible to take pressure off inflation, that’s not what’s needed. Now, there’s many areas where we’ve already outlined our view, that spending is not appropriate at the moment. $45 billion of spending we’ve opposed in the Parliament in recent months, about $18 billion of interest cost attached to that. We do think that adding over 10,000 new public servants at the moment is not the right answer, particularly at a time when we do need to put this downward pressure on inflation. Outside of national security and frontline services there’s real questions about whether that is needed. </p>
<p>MICHELLE GRATTON: Well, what about the welfare spending, though? You’re saying there should be less of that, those initiatives?</p>
<p>ANGUS TAYLOR: Well, we’ll work through all of these, and we have our own processes as you know.</p>
<p>MICHELLE GRATTON: Sure, but they’re pretty obvious. </p>
<p>ANGUS TAYLOR: Well, no, because you’ve got to go through your process and make decisions as a Shadow Cabinet and I always respect that process and we should, you know, that’s how these things work. What I would say in general, as a matter of principle right now is that what really is needed is dealing with inflation at the source, not dealing with it through the symptoms. There’s no point putting a band aid on a bullet wound, you’ve got to go to the source and a budget that puts downward pressure on inflation is good for all Australians. Everybody is better off including the most vulnerable, you don’t have to pick and choose. We all benefit from the prices of the goods and services we buy being lower than they otherwise would be. </p>
<p>MICHELLE GRATTAN: But even taking that point, nevertheless, we’re in a situation where the very vulnerable people on JobSeeker and so on are needing more money, needing more assistance. Are you saying that was inappropriate? </p>
<p>ANGUS TAYLOR: I’m saying that the risk with this strategy is that you give with one hand and take away more with the other and we are seeing, we’ve got stagnant real wages in this election cycle over three years. They’re not growing, and that’s in the Budget papers. It’s very clear.</p>
<p>MICHELLE GRATTAN: But they are starting to grow over this next year.</p>
<p>ANGUS TAYLOR: In this election cycle, under Labor’s government real wages are flat. Over the three years and you know, this is real pain that’s being felt. There’ll be people listening to this out there now who feel substantially worse off than they were a year ago. And the truth is, if you’re a family with a mortgage right now, a typical family will be $25,000 a year worse off than they were a year ago. That is that is what inflationary pressures and interest rate pressures do to people’s standard of living. And the key here is to go to the source with a budget that is good for all Australians. You don’t need to discriminate. Everyone is better off. If you can take pressure off inflation. That should have been the focus of this budget, and it wasn’t.</p>
<p>MICHELLE GRATTAN: Now let’s go to this question of inflation and dig down. Jim Chalmers claims that the budget won’t put pressure on inflation. The Opposition says it will. What is your evidence? What is your argument that it will be inflationary?</p>
<p>ANGUS TAYLOR: Well, a couple of things I’d say, first is you’ve got two independent economists saying it will be inflationary people like Chris Richardson and Stephen Hamilton, have all made this point. Chris Richardson was very strong last night straight out of the box, saying that this will be inflationary.</p>
<p>MICHELLE GRATTAN: He’s had a bit of a clip around the ear from the Prime Minister.</p>
<p>ANGUS TAYLOR: Well, I mean, you know that’s how Labor works. If someone says something that Labor doesn’t like, they clip people around the year. That’s unfortunate, but the truth is, he is speaking out because if you have $185 billion of new spending since, they got into government, $2 of spending initiatives versus every dollar of revenue initiative, that is expansionary. Now, right now, we don’t need that. I mean, we know historically, if you want to deal with inflation, you’ve got to see fiscal consolidation. We also know the best kind of fiscal consolidation is to make sure your economy grows faster than you spend. We confronted this in the past. If you don’t have that you end up where we ended up in the 70s and 80s where central banks have to do all the work and the pain is enormous, Michelle, we, many of us, certainly my age and older remember that only too well and that’s not where we want to be in the coming months and years.</p>
<p>MICHELLE GRATTAN: So, do you think that this budget will push up interest rates?</p>
<p>ANGUS TAYLOR: I’m not going to make a forecast on interest rates. I mean, the Treasurer loves to make forecasts. Lots of people have been trying to forecast inflation and interest rates and frankly, they’ve largely been wrong. We saw, even last week, the Reserve Bank raised interest rates, the pundits, the capital markets, they all had it wrong. Economists had it wrong. So, the truth of the matter is the inflationary pressures have been stronger than has been predicted, substantially stronger than has been predicted and that’s why now it’s incumbent on the Government to take that risk away, to take those pressures off every Australian. There was an opportunity here to unite Australians behind the one thing that is hurting all of us. There was an opportunity to do that. They’ve missed that opportunity and I think both in terms of what’s right for Australia and politically frankly, there’s been a real opportunity missed, and it’s incredibly disappointing.</p>
<p>MICHELLE GRATTAN: But when you say there was an opportunity, what positively should have been done?</p>
<p>ANGUS TAYLOR: Well, I’ve already said a number of things, but I’ll add to that. The first and most striking thing of all, when you read the Budget papers is one of the first things I look to. So, when you look at the fiscal strategy, there is no commitment to budget balance in this fiscal strategy. Now since the charter of budget honesty was put in place in the 1990’s under Peter Costello, there has always been a commitment to budget balance. It’s gone. And the reason is…</p>
<p>MICHELLE GRATTAN: Well, we’ve got it now though. </p>
<p>ANGUS TAYLOR: Well, hang on, for a year after an $80 billion windfall, when as I think I’ve said to you before, we had a budget coming out of the pandemic through to the May election that was already in balance, but from here on in the Treasury is taking it over a cliff, going out to an over $36 billion deficit. That’s not expansionary, that’s inflationary. If you take a budget that’s in balance, and then you turn it into a big deficit. It’s pretty it’s pretty straightforward. I don’t know how you can argue that that’s not expansionary.</p>
<p>MICHELLE GRATTAN: Isn’t it possible, though – and we’ve seen changes over forward estimates, incredibly, over recent years – isn’t it possible that the deficit that’s forecast could be reined in a lot with spending cuts, for example to the NDIS? </p>
<p>ANGUS TAYLOR: Look I don’t know. Look I read the budget and I assume that’s the Government’s plan. I don’t have any other plan to work on Michelle. So that is their plan. That’s what they put out. They just put out all the details and I think that’s what we’ve got to assume that their plan is right now. Now if they plan, more spending and more taxes, they should tell us.</p>
<p>MICHELLE GRATTAN: Now, I heard you say last night that the Opposition supported the energy price help and had done so all along. But in fact, you opposed the legislation that was part of that.</p>
<p>ANGUS TAYLOR: Oh, well, you know, Labor plays tricky games with these things. They put and they’re doing this time and time again. They put two pieces of legislation together. One they know we can’t support, and one they know we do support and they put us in those positions. We support that energy price relief. I’ll tell you why, Labor promised a $275 reduction in electricity bills. We now know from these Budget papers, that for a typical Australian family, there’s going to be a $500 energy price increase even after that relief. So, they’ve completely failed in their promise. Australians worked on the assumption that the promise was going to be kept. It hasn’t been kept. They deserve better than that. And that’s why unfortunately, and we do it with regret because it’s not this is not where we want it to be, but the truth of the matter is Australians deserved better than that, and Labor’s had to deal with it.</p>
<p>MICHELLE GRATTAN: Now you’ve seen the details of the changes to the petroleum resource rent tax. Are you going to support that?</p>
<p>ANGUS TAYLOR: We haven’t seen the details? That’s not right. We’ve seen a top line number and the thing about resource rent taxes, and we learnt this with the mining tax, is they are incredibly complex? </p>
<p>MICHELLE GRATTAN: Well, the industry supports them.</p>
<p>ANGUS TAYLOR: Well hang on. We are interested in what’s right for Australia and Australians. I hear a lot of commentators who wouldn’t normally say that the mining industry should be supported in whatever they say or the resources industry. We will make a judgement on this as we always do on what’s right for Australia. Again, I have to say if you want the price of something to go down, you don’t normally hit it with a tax. That being said, we will work through this carefully. I saw the mining resource rent tax way back in the in the last Labor government completely fail. Jim Chalmers was in Wayne Swans office at the time, it was a dog’s breakfast, a complete disaster. They are very complex taxes and are they going down? Is this going to be a bad tax? I don’t know. You’ve got to get into the detail. We’ll no doubt, we’ll get briefings on this over the coming weeks.</p>
<p>MICHELLE GRATTAN: Like you, I remember that big tax, and the big difference is that the mining industry opposed it very, very strongly. This time the industry is going along with it.</p>
<p>ANGUS TAYLOR: Well, a couple of things. Just because the mining industry supports something, doesn’t mean it’s right. And I think all people should understand that. We’re interested in what’s right for Australia and Australians and for energy prices for Australians in particular. So that’s got to be the test. As you know from that last mining tax, actually, the final version, the mining industry did support it, but it was a complete dog’s breakfast and we got rid of it because of that. It wasn’t helping. It was deterring investment, because it was sending the wrong signal to investors. So, it was a bad tax, and it was abolished as a result, but we’ll look at this one with all its complexity, and we’ll make a judgment about whether it’s good for Australia and Australians.</p>
<p>MICHELLE GRATTAN: Just finally, and I know you say you work through the whole budget but is there anything now that the Opposition will fight, will resist in Parliament?</p>
<p>ANGUS TAYLOR: Can I start by saying the things we’re going to support. There are some things in this budget we are going to support. So, we do support the instant asset write off, it’s only $20,000, but that’s important for small businesses. We do support the initiative on women’s safety. We think that’s really positive. The veteran’s payments, and the extension of the work bonus for pensioners. I think these are important initiatives. We proposed that sometime back, it’s not the full version of it, we’d prefer more, but it’s something for an extra six months and that will encourage pensioners into the workforce, and we like that. We’ll work our way through all the other initiatives. We have to say making government bigger in Canberra. It’s not necessarily the answer right now, particularly with these inflationary pressures at work, whether there’s any legislation on that probably not but there’s some initiatives around bigger government that we were concerned about, and we’ll work our way through that.</p>
<p>MICHELLE GRATTAN: Well talking about bigger government, just to finish off, what about the extra staff for politicians?</p>
<p>ANGUS TAYLOR: Well, it’s good question. So, the first thing I’ll say about it, is we’re pleased that there’s no budget for extra politicians in the budget. And whilst Albanese has been talking about more politicians, as you will remember a few weeks back he was saying maybe we need more politicians. We don’t agree with that. </p>
<p>MICHELLE GRATTAN: But what about the staff?</p>
<p>ANGUS TAYLOR: The staff issue, again we’ll work our way through that. It’s far more modest, I have to say, than more politicians…</p>
<p>MICHELLE GRATTAN: I’d be very surprised if you end up saying no.</p>
<p>ANGUS TAYLOR: Well, Michelle, I mean every penny has to be scrutinized right now because every penny risks raising inflation for Australians, and that’s why we’re taking a very principled approach to this. </p>
<p>MICHELLE GRATTAN: Angus Taylor, thank you very much for talking with us. </p>
<p>ANGUS TAYLOR: Thanks Michelle.</p>
<p>ENDS</p><img src="https://counter.theconversation.com/content/205431/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In this podcast, @michellegrattan canvasses the budget with Treasurer @JEChalmers, Shadow Treasurer @AngusTaylorMP and The Conversation's politics + society editor @amandadunn10Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2051922023-05-07T12:57:34Z2023-05-07T12:57:34ZView from The Hill: Budget ‘centrepiece’ will be $14.6 billion cost-of-living package<figure><img src="https://images.theconversation.com/files/524773/original/file-20230507-27-cet8aw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">original</span> </figcaption></figure><p>A $14.6 billion four-year cost-of-living package will be the centrepiece of Labor’s second budget, which seeks to balance spending restraint with its election commitment to not leave people behind. </p>
<p>The latter days of preparing the budget – which was printed at the weekend – have seen mounting pressure, including from outspoken members of the Labor caucus, for greater help for the disadvantaged. </p>
<p>A strong revenue flow, including from a pick-up in wages, appears to have made it possible for the government to do somewhat more on welfare payments than it originally intended. </p>
<p>There was speculation at the weekend, which the government refused to confirm or deny, of a possible modest across-the-board rise in JobSeeker. Earlier, the JobSeeker assistance was expected to be confined to those 55 and over.</p>
<p>At the same time the budget is tipped to see a surplus this financial year, although Treasurer Jim Chalmers constantly stresses the pressure it will be under in later years. </p>
<p>The government says its cost-of-living plan, which includes already flagged relief on power bills and cheaper medicines, will not be inflationary but will directly lower price pressures and the CPI in 2023-24. </p>
<p>On Sunday Chalmers, who did a round of media interviews, said more than five million households would get help with their electricity bills, as would about a million small businesses. </p>
<p>Asked the maximum price relief on energy bills, Chalmers said, “people will be getting several hundred dollars if they’re on pensions and payments or a small business.” </p>
<p>The government has struck deals with states and territories and the relief will vary in different parts of the country.</p>
<p>There will also be investments in energy efficiency. </p>
<p>About 40% of the upgrade in revenue comes from strong employment growth and a pick-up in wages growth. Some 20% is from higher commodity prices, and the rest comes from other sources including higher company profits in the non-mining and finance sectors.</p>
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Read more:
<a href="https://theconversation.com/budget-shows-real-wages-expected-to-start-growing-early-next-year-and-promises-effort-to-shift-the-needle-in-disadvantaged-communities-205133">Budget shows real wages expected to start growing early next year and promises effort to 'shift the needle' in disadvantaged communities</a>
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<p>The Treasurer said the budget would be “in the best Labor tradition – help for the vulnerable with cost-of-living pressures, an eye on the future, and responsible economic management”. It would have substantial savings, substantial spending restraint, and “modest but meaningful tax changes”.</p>
<p>Among the tax changes will be an extension of the petroleum resource rent tax that will mean the offshore LNG industry pays more tax, earlier. Deductions will be limited under the changes. This will increase receipts by $2.4 billion over the forward estimates. </p>
<p>The Australian Petroleum & Exploration Association reacted benignly. </p>
<p>APPEA chief executive Samantha McCulloch said: “The changes aim to get the balance right between the undeniable need for a strong gas sector to support reliable electricity and domestic manufacturing for decades to come and the need for a more sustainable budget”. She said the announcement would “provide greater certainty” for the industry.</p>
<p>Meanwhile Opposition Leader Peter Dutton faces fresh pressure with another byelection looming, following the weekend announcement by former minister Stuart Robert that he will quit parliament soon. </p>
<p>Robert, who is shadow assistant treasurer, holds the Gold Coast seat of Fadden. He said he wanted to spend more time with his family. </p>
<p>Robert has suffered some bad publicity relating to various controversies, and was one of the ministers with oversight of Robodebt, on which a royal commission report will come down mid year. He admitted to the commission his serious doubts about the scheme – which was found to be illegal – but argued he had to defend it because of cabinet solidarity,</p>
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Read more:
<a href="https://theconversation.com/government-to-spend-11-3-billion-over-four-years-to-fund-15-pay-rise-for-aged-care-workers-204919">Government to spend $11.3 billion over four years to fund 15% pay rise for aged care workers</a>
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<p>Though spooked by the loss of the Victorian seat of Aston at a byelection, the Liberals would be confident of holding Fadden, which is on a margin of more than 10%. Queensland is a strong state for the Coalition and Dutton’s home state. </p>
<p>Nevertheless Dutton at the weekend stressed the importance of getting a local as the Fadden candidate. One – though not the main – factor in the Aston loss was that the Liberal candidate came from another part of Melbourne. </p>
<p>“We’ll preselect somebody who understands that part of the Gold Coast, and we should be in that seat, frankly, preselecting somebody who can be a future cabinet minister or a leader of our party. So, we will work hard with the LNP in Queensland to make sure that we do win,” Dutton said.</p>
<p>There is also an expectation that former prime minister Scott Morrison will resign from parliament before long.</p><img src="https://counter.theconversation.com/content/205192/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A strong revenue flow, including from a pick-up in wages, appears to have made it possible for the government to do somewhat more on welfare payments than it originally intendedMichelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2051332023-05-05T12:33:56Z2023-05-05T12:33:56ZBudget shows real wages expected to start growing early next year and promises effort to ‘shift the needle’ in disadvantaged communities<p>Real wages are expected to start growing slightly earlier and grow more strongly than previously forecast, according to the latest Treasury estimates. </p>
<p>Higher forecasts for wage growth and lower forecasts for inflation in 2023-24 than in the last budget are expected to bring forward the return for real wages growth to early 2024. In the October budget the return was put at mid 2024. </p>
<p>But unemployment is set to rise over the coming year.</p>
<p>Tuesday’s budget will forecast a growth in real wages of three quarters of a percentage point over the year to June 2024. This is an upgrade of half of a percentage point since the October budget. </p>
<p>The government says Treasury’s upgraded forecasts show a resilience in Australia’s labour market.</p>
<p>Unemployment is forecast to be 3.5% in the June quarter of this year increasing to 4.25% in the June quarter next year. This is an improvement of a quarter of a percentage point in both years since the October budget.</p>
<p>Unemployment is still expected to peak at 4.5% But this is now expected to be reached in 2024-25, compared to the expectation in the last budget that the peak would be in 2023-24. </p>
<p>The budget will forecast an additional 500,000 jobs will be created by the June quarter 2026. This is some 200,000 more than expected last October. </p>
<p>There has been speculation this financial year could see the budget in balance or even surplus. Treasurer Jim Chalmers would only say there would be a “substantial improvement in the near term”, but then the pressures on the budget would intensify.</p>
<p>Chalmers said the substantial improvement wasn’t just because of higher commodity prices. “It is also about lower unemployment and the beginning of wages growth”. </p>
<p>He said “getting wages growing again is central to our economic plan and our budget. </p>
<p>"We’re pleased to see signs that wages are moving,” he said.</p>
<p>“While this is a step in the right direction, we know that many Australians are still under the pump from cost-of-living pressures and rising interest rates. </p>
<p>"A big part of tackling cost-of-living challenges is to help ensure ordinary Australian workers can earn enough to provide for their loved ones and get ahead.</p>
<p>"We also understand that securing real wages growth means getting inflation under control and our Energy Price Relief Plan is already helping with this.”</p>
<p>The budget “will be focused on targeted cost-of-living relief that doesn’t add to inflation, getting wages moving again and laying the foundations for a stronger and more resilient economy”. </p>
<p>Chalmers on Friday announced the budget would contain a program to tackle entrenched disadvantage in particular communities. </p>
<p>There would be a series of “place-based initiatives to try and shift the needle”.</p>
<p>Chalmers said there was concern that even with low unemployment there were pockets of disadvantage.</p>
<p>“We don’t want to see long-term unemployment. We don’t want to see entrenched intergenerational disadvantage.”</p>
<p>The $200 million program would back local leaders and organisations working on the difficult social and economic challenges in these areas. </p>
<p>“What that means is partnering with philanthropic organisations, it means investing in local community groups, it means doing something meaningful about impact investing. There are a number of different parts to our strategy.”</p>
<p>He said “to build the kind of economy that we want, we’ve got to align what we want to see in our economy with what we want to see in our society and in our communities.” </p>
<p>Australia, which generated remarkable opportunities for people in the broad, “needs to do a much better job of putting those opportunities within reach of more people”.</p><img src="https://counter.theconversation.com/content/205133/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Tuesday’s budget will forecast a growth in real wages of three quarters of a percentage point over the year to June 2024. This is an upgrade of half of a percentage point since the October budgetMichelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2050222023-05-04T11:51:24Z2023-05-04T11:51:24ZGrattan on Friday: Albanese enjoys London limelight while Chalmers sweats in budget spotlight<p>The timing of history. How Anglophile and monarchist Tony Abbott would love to have been the prime minister attending the coronation. To say nothing of John Howard, a key figure in fending off an Australian republic in 1999. </p>
<p>Instead it is Anthony Albanese in London, explaining on British television how he, a leader dedicated to trying to make our country a republic, is happy to be affirming allegiance to its new head of state. </p>
<p>Albanese has not been doing a bad job of smoothing any perceived contradiction, once again showing he can be a man for all occasions, some of them challenging. </p>
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<p>In his <a href="https://www.skynews.com.au/australia-news/politics/prime-minister-anthony-albanese-pressed-by-piers-morgan-on-australian-republic-dream-ahead-of-king-charles-iiis-coronation/news-story/9faae90e9ea58667488fd830ca7dd3fe">hour-long interview with conservative Sky broadcaster Piers Morgan</a> (a surprising appearance in itself) Albanese navigated some awkward questions, retold his familiar childhood story (with detail about finding his father), which Morgan appeared to find fascinating, and juggled his republicanism with upholding Australia’s present loyalty to King Charles. </p>
<p>While vague about timing (we know he wants a republic referendum in a second term) Albanese said that when there was a public demand for another vote, “I’m sure a vote will be held”, but it wasn’t imminent.</p>
<p>Albanese notably reaffirmed his preference for “an appointed head of state”, referring to “some process whereby democratically elected institutions, in the House of Representatives and the Senate, have a say in that”. </p>
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<a href="https://theconversation.com/nine-things-you-should-know-about-a-potential-australian-republic-89759">Nine things you should know about a potential Australian republic</a>
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<p>Division among republicans over the model (having the president appointed by the parliament versus being popularly elected) helped sink the 1999 vote. In future, the pressure would be for a popularly elected model. The challenge for Labor, if and when it gets to a referendum, would be to deal with this demand, but avoid a model of potentially competing power centres. </p>
<p>While Albanese (who lands back in Australia on budget eve) basks in the international limelight, at home Treasurer Jim Chalmers this week has been feeling the heat of the spotlight. </p>
<p>In current politics, the days before a budget are as orchestrated by the government as budget day itself. What you read and hear about the measures are not “leaks” but so-called “drops” to the media, designed for a flow of good news ahead of time (or sometimes getting bad news out of the way). </p>
<p>More rarely there are genuine leaks – a journalist gets a real scoop, something the government didn’t intend to be out that day. Such was the <a href="https://7news.com.au/business/centrelink/major-change-coming-to-jobseeker-payments-for-227000-recipients-as-federal-budget-includes-boost-for-older-australians-c-10514696">Seven Network’s story of an anticipated rise in JobSeeker for people 55 and over</a> (those 60-plus who’ve been out of work for nine months already get a higher rate). </p>
<p>Chalmers would not confirm the accuracy of the leak, but he put up a spirited defence of the case for such a measure, which was taken as a tick. One of his arguments is that it would particularly help women, with many older unemployed women especially vulnerable. Assisting them also fits well with Labor’s gendered lens. </p>
<p>Inevitably, however, there was an immediate backlash from those speaking up for the young. The debate became a microcosm of the government’s wider problem with this budget, as Chalmers has sought to balance the need for restraint (reinforced by the Reserve Bank’s interest rate rise this week) with the strong calls for the government to meet its oft-repeated election commitment to “not leave people behind”. Albanese told Morgan: “The philosophy I took to the election was two parts, no one held back and no one left behind.”</p>
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<a href="https://theconversation.com/government-to-spend-11-3-billion-over-four-years-to-fund-15-pay-rise-for-aged-care-workers-204919">Government to spend $11.3 billion over four years to fund 15% pay rise for aged care workers</a>
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<p>We’ve seen in this intense tug of war both the influence of the crossbench and of the usually compliant caucus. </p>
<p>It was ACT independent senator David Pocock who secured (as part of a deal to pass legislation) the economic inclusion advisory committee that <a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/release-economic-inclusion-advisory-committee-report">recommended a big increase in JobSeeker for everyone</a>. A large number of Labor backbenchers publicly joined the call, adding to the squeeze on the government. </p>
<p>The budget will contain not just some welfare initiatives, including for single mothers, but other measures to address the cost-of-living crisis. The reaction to it can be expected to come from various directions. </p>
<p>The assault from the left will say that the government hasn’t done enough. Leaving “nobody behind” is a very subjective proposition. When it comes to attack, this budget is made for the Greens. The minor party has emerged as arguably more effective as an “opposition” voice than the official opposition (this is separate from a judgment on the content of what the Greens say). And Labor knows this is dangerous in the longer term, given the Greens are eating away at a few seats in the lower house. </p>
<p>For the Coalition, finding a length and line in responding to the budget could be trickier. Demanding more be done on welfare is not the Coalition’s bag. It will no doubt say not enough attention is being paid to the cost of living. But any suggestion that the budget should have spent more than whatever it does spend will undermine the Coalition argument about restraint. </p>
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<a href="https://theconversation.com/word-from-the-hill-another-rate-rise-higher-tax-on-cigarettes-and-likely-jobseeker-boost-for-over-55s-204814">Word from The Hill: Another rate rise, higher tax on cigarettes, and likely JobSeeker boost for over-55s</a>
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<p>If, as speculated, the budget predicts a 2022-23 surplus, that further complicates the opposition’s reaction. The Coalition is stymied, whether it attacks from the right or (less likely) the left.</p>
<p>Depending on its precise crafting, the budget could be a slippery beast for the opposition to handle. Meanwhile Peter Dutton faces his own personal test next week. </p>
<p>In theory, an opposition leader’s budget reply this early in the term shouldn’t be of great moment. But Dutton is under the pump, with bad polling numbers and divided ranks, and so the occasion will matter. </p>
<p>When he rises in the House of Representatives on Thursday night, Dutton will require both negative and positive messages. </p>
<p>The difficulty of his task will depend partly on how the budget has been received. Beyond that, Dutton needs to unveil something substantial in policy terms, filling at least a corner of the Coalition’s current policy vacuum. </p>
<p>Not that this is easy. The Coalition can’t afford to make itself the story in a bad way. It’s already done this on the Voice.</p><img src="https://counter.theconversation.com/content/205022/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While Albanese (who lands back in Australia on budget eve) basks in the international limelight, at home Treasurer Jim Chalmers this week has been feeling the heat of the spotlight.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2049192023-05-03T12:46:24Z2023-05-03T12:46:24ZGovernment to spend $11.3 billion over four years to fund 15% pay rise for aged care workers<p>Tuesday’s budget will include $11.3 billion over four years to fund the 15% pay rise aged care workers will receive from July 1.</p>
<p>The rise was awarded by the Fair Work Commission. Labor committed at last year’s election to fully fund a rise in pay for this sector. </p>
<p>Given acute staff shortages, it is hoped that the higher wages will attract more workers.</p>
<p>The pay rises will benefit more than 250,000 people.</p>
<p>A registered nurse on a level 2.3 award wage will receive an extra $196.08 a week – more than $10,000 a year. </p>
<p>A personal care worker on a level 4 (aged care award) or a home care worker on a level 3.1 (social, community, home care and disability services award) will get an extra $141.10 weekly – more than $7300 annually. </p>
<p>Recreational officers and chefs in the sector also are in line for increases. </p>
<p>Treasurer Jim Chalmers said that “for too long, those working in aged care have been asked to work harder for longer without enough reward, but with this budget that changes”. </p>
<p>Aged Care Minister Anika Wells said that “fair wages play a major role in attracting and retaining workers”. </p>
<p>Aged care is now the fifth-largest area of federal government spending.
This financial year the cost of aged care will increase from $24.8 billion to an estimated $29.6 billion (23%).</p>
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<a href="https://theconversation.com/politics-with-michelle-grattan-ndia-chair-kurt-fearnley-on-fundamental-reform-of-the-disability-scheme-204922">Politics with Michelle Grattan: NDIA chair Kurt Fearnley on 'fundamental' reform of the disability scheme</a>
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<p>There are about 1.5 million recipients of aged care in Australia, with growing pressures on the system ahead as the population ages.</p>
<p>In a round of Wednesday media appearances, Chalmers reiterated next week’s budget would contain “substantial cost-of-living relief”. </p>
<p>“It’ll prioritise the most vulnerable. It won’t just be limited by age, and it will be responsible.”</p>
<p>Chalmers said the budget would forecast the economy slowing considerably but not going into recession. </p>
<p>“The budget will be a difficult balancing act, between providing the cost-of-living relief that people need, being conscious of the pressures on the budget and all of that debt that we inherited, but also making sure that we can grow our way out of this slowing economy by investing in things like energy and laying some of these foundations for growth in our economy.”</p>
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<a href="https://theconversation.com/word-from-the-hill-another-rate-rise-higher-tax-on-cigarettes-and-likely-jobseeker-boost-for-over-55s-204814">Word from The Hill: Another rate rise, higher tax on cigarettes, and likely JobSeeker boost for over-55s</a>
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<p>Chalmers said the budget would also contain efforts “to get people into work if they want to work, including in communities where there has been for too long entrenched disadvantage”. </p>
<p>“We’ve got colleagues working on the job agency system to make sure that if people want to work, they can grab the opportunities of an economy that’s got unemployment currently running at three and a half per cent.”</p><img src="https://counter.theconversation.com/content/204919/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Treasurer Jim Chalmers said that “for too long, those working in aged care have been asked to work harder for longer without enough reward, but with this budget that changes”Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2041932023-04-20T10:32:03Z2023-04-20T10:32:03ZGrattan on Friday: The government invited ambit claims for the budget and now it will be judged against them<p>Budgets are for stakeholders and interest groups like Christmas is for kids. They’re preceded by a multitude of letters to “Santa”, aka the treasurer, in the run-up. </p>
<p>For the May 9 budget, two key correspondents were appointed by the government itself. This week, the wish lists from the Economic Inclusion Advisory Committee and the Women’s Economic Equality Taskforce were released. </p>
<p>The inclusion committee, an ongoing body to review the adequacy of welfare support, was born out of a demand to Prime Minister Anthony Albanese from Senate crossbencher David Pocock last year, in exchange for his vote on the government’s industrial relations legislation. </p>
<p>It was always clear the committee would confront the government with more demands than could be met, and that would become a political challenge. </p>
<p>The taskforce, chaired by businesswoman and gender equity advocate Sam Mostyn, was set up to reflect the government’s desire to underline its policy tilt towards women. </p>
<p>Managing expectations before a budget is always tricky, and these committees are making this especially so for Treasurer Jim Chalmers ahead of his second budget. </p>
<p>The message from Chalmers is that funds are limited and the government can’t do all it might like to do (let alone all that others might want it to do). </p>
<p>Indeed, Chalmers is trying to find ways to constrain spending – to allow maximum room for budget repair – rather than expand it. </p>
<p>The Minister for the National Disability Insurance Scheme, Bill Shorten, this week outlined areas for reform of the NDIS to get it “back on track”. While Shorten stresses this is about improving outcomes, everyone in government knows the NDIS’s costs must be contained or the scheme will be totally unsustainable. </p>
<p>On Treasury figures, the inclusion report’s recommendations would cost more than $34 billion over the forward estimates.</p>
<p>The government has indicated it expects to adopt some of the proposals. But it has already shied away from the biggest one: a large increase in JobSeeker, which the report says should be taken to some 90% of the age pension (at a cost of $24 billion over the forward estimates). </p>
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<a href="https://theconversation.com/boosting-jobseeker-is-the-most-effective-way-to-tackle-poverty-what-the-treasurers-committee-told-him-204045">Boosting JobSeeker is the most effective way to tackle poverty: what the treasurer's committee told him</a>
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<p>That would restore the relativity of the mid-1990s. At present, the rate for singles is about 65% of the age pension.</p>
<p>Among the things on the “urgent” list of the women’s taskforce are reinstatement of the parenting payment (single) for women with children aged over eight, abolition of the childcare subsidy activity test, and investment in “an interim pay rise for all early childhood educators”. </p>
<p>Despite the government ruling out the “large” increase in JobSeeker, it is still possible the budget could make some change to it, among other pickings from the inclusion report. </p>
<p>Similarly, the government could take up the reinstatement of the parenting payment (single), for which there is considerable pressure. </p>
<p>The inclusion committee is chaired by former Labor minister Jenny Macklin, who has an extensive background in welfare policy, and includes substantial expertise among its members. Its report contains a plethora of detail and it is closely argued. </p>
<p>The report’s lens is squarely focused on issues of adequacy and poverty. While it says its JobSeeker recommendation would not be a significant discouragement to seeking paid work (and the current low rate is a barrier to doing so), some believe the recommended big lift would indeed create a disincentive in our present full employment labour market. </p>
<p>Many people, especially in Labor’s base, will see this report as a benchmark for what a Labor government should do to promote fairness for those at the bottom and create a more equitable society. The same applies with the women’s taskforce measures.</p>
<p>In that sense, the budget must inevitably fall short of the tests these reports pose for it. </p>
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Read more:
<a href="https://theconversation.com/grattan-on-friday-chalmers-grapples-with-a-budget-where-economics-and-politics-pull-in-different-directions-203759">Grattan on Friday: Chalmers grapples with a budget where economics and politics pull in different directions</a>
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<p>Commentators have already suggested a parallel, of sorts, between the proposed Indigenous Voice to Parliament and the inclusion committee. The comparison is a very long stretch, but in each case, special access is involved but the government isn’t bound by recommendations. </p>
<p>What we are seeing with the inclusion committee (and indeed the women’s taskforce) is that the demands may shape the public conversation. The same would apply with the Voice. </p>
<p>How the government responds to the inclusion committee in particular could affect its future relations with the Senate crossbench. Pocock is already out in the media rejecting the government’s arguments that it is constrained by a lack of resources. What about those $250 billion stage 3 tax cuts? he asks. (The government has said they won’t be touched in this budget.) </p>
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<a href="https://theconversation.com/grattan-on-friday-david-pocock-has-only-just-arrived-in-the-senate-and-now-hes-negotiating-with-the-pm-195295">Grattan on Friday: David Pocock has only just arrived in the Senate and now he's negotiating with the PM</a>
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<p>The way Pocock and other key crossbenchers react post-budget will depend on precisely what’s taken up. Pocock will be able to claim a victory if he can say his demand for the committee made a difference. </p>
<p>While the budget is a major juggling act for Chalmers, his reform of the Reserve Bank is shaping up, in political terms, as an easier task. </p>
<p>The changes in the report from the review panel, released on Thursday and accepted in principle by the government, are extensive. These include setting up an expert board that would decide monetary policy, which would be separate from the bank’s general board. The aim is to improve the decision-making of the bank, which has come under sharp criticism in the wake of its recent performance on interest rates. </p>
<p>Some of the changes will require legislation, for which Chalmers has been very anxious to get a bipartisan approach. He doesn’t want to have to haggle with the Senate crossbenchers, cutting deals and finding trade-offs, in this sensitive area. </p>
<p>So he has engaged the shadow treasurer, Angus Taylor, during the review process. Taylor has been briefed along the way and was given an advance copy of the report. </p>
<p>The strategy appears to have paid off. Taylor was positive about the review’s plan for a board of experts, and said: “It is the Coalition’s intention to continue to approach the implementation of this review with a spirit of bipartisanship.”</p>
<p>It’s a rare and welcome move away from the opposition’s usual hyper-negativity.</p><img src="https://counter.theconversation.com/content/204193/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Managing expectations before a budget is always tricky. Two committees are making this especially so for Treasurer Jim Chalmers ahead of his second budget.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2032392023-04-04T12:33:28Z2023-04-04T12:33:28ZMay budget to boost cultural and historical institutions with $535m four-year injection<p>Next month’s budget will provide $535.3 million extra over four years for nine major cultural and historical institutions. </p>
<p>The funding will go to the Australian National Maritime Museum, Bundanon Trust, Museum of Australian Democracy (Old Parliament House), National Archives of Australia, National Film and Sound Archive, National Gallery of Australia, National Library of Australia, National Museum of Australia and the National Portrait Gallery of Australia.</p>
<p>The money includes the $33 million earlier announced for the National Library’s digital archive Trove.</p>
<p>The government also promises that beyond the four years, the institutions will get indexed funding. </p>
<p>“Our institutions will be able to meet their financial obligations and invest for the future knowing they finally have a government that values them just as the Australian people do,” a statement on the funding says. </p>
<p>The government says it will “establish clear line of sight over future capital works and improvements to ensure the institutions never again fall into the state of disrepair they did over the last decade”.</p>
<p>But it has not abolished the “efficiency dividend” requirement that has been a bane of the institutions over many years. </p>
<p>Finance Minister Katy Gallagher this week defended the efficiency dividend, telling The Canberra Times it was appropriate as long as the funding was adequate. </p>
<p>“Putting a productivity efficiency component into any funding I think is a responsible part of government and making sure we keep the budget on a sustainable footing,” she said.</p>
<p>The efficiency dividend dates from the 1980s and has been again criticised by the Community and Public Sector Union, which represents staff at the institutions. </p>
<p>Prime Minister Anthony Albanese said the extra funding was another example of his government having to clean up the mess left by the Coalition. </p>
<p>Arts Minister Tony Burke said the former government had left the institutions in “a shocking state of disrepair” and the funding would get them “back to where they should be – where the government delivers strong core funding and philanthropists take them to the next level”.</p>
<p>The financial squeeze has led to some institutions having to reduce staff and services and neglect some activities and maintenance. </p>
<p>The government recently appointed former ABC journalist Barrie Cassidy as chair of the Old Parliament House board. </p>
<p>This is second time around for Cassidy, a one-time staffer to Bob Hawke. He was appointed chair of the Old Parliament House advisory council at the very end of the last Labor government but resigned after the Coalition won the 2013 election. Cassidy (who was still with the ABC at the time) was pressured to go by then arts minister George Brandis.</p><img src="https://counter.theconversation.com/content/203239/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The government also promises that beyond the four years, the institutions will get indexed fundingMichelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2004902023-02-23T12:35:41Z2023-02-23T12:35:41ZSouth Africa’s bailout of Eskom won’t end power cuts: splitting up the utility can, as other countries have shown<figure><img src="https://images.theconversation.com/files/511919/original/file-20230223-2271-xuao0x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">AFP via Getty Images</span></span></figcaption></figure><p>The announcement by the South African finance minister, Enoch Godongwana, of <a href="https://www.treasury.gov.za/documents/National%20Budget/2023/review/Annexure%20W3.pdf">debt relief</a> for the country’s troubled power utility, <a href="https://www.eskom.co.za/">Eskom</a>, is a step forward. It will fix one problem: Eskom has too much debt. But the plan won’t end power cuts which <a href="https://www.treasury.gov.za/documents/national%20budget/2023/speech/speech.pdf#page=9">have worsened in recent years</a>. </p>
<p>The international experience is that one way to end electricity shortages is to allow competitively-priced privately-funded generation at scale. This requires a reorganisation of South Africa’s electricity market <a href="https://www.gov.za/sites/default/files/gcis_document/201910/roadmap-eskom.pdf">along the lines announced</a> by the Department of Public Enterprises nearly four years ago. The crux of the plan was to split Eskom into three separate units – generation, transmission and distribution, with transmission remaining state-owned.</p>
<p>With the <a href="https://www.treasury.gov.za/documents/national%20budget/2023/speech/speech.pdf#page=10">announced conditions</a>, which include the requirement that Eskom prioritise capital expenditure in transmission and distribution during the debt-relief period, the finance minister has missed an opportunity to finally achieve this.</p>
<h2>What we can learn from other countries</h2>
<p>Other countries that have had power cuts offer South Africa lessons. China, for example, faced <a href="https://www.theguardian.com/world/2003/dec/05/china.jonathanwatts">rolling blackouts</a> between 2003 and 2006 because of <a href="https://journals.openedition.org/chinaperspectives/2783">an unexpected growth spurt</a>. In 2015, <a href="https://greekreporter.com/2015/04/28/nationwide-blackout-in-greek-tv-this-morning/">Greece</a> was in the middle of a financial crisis and its people could not afford the electricity supply, some of which came through a complex deal with Russia. And in <a href="https://apnews.com/article/911b4884559dc01ae604ce187c39c9ba">Colombia</a>, a drought in 1992 caused the main source of electricity supply – which came from a hydroelectric plant – to literally dry up.</p>
<p>All these countries experienced power cuts. But South Africa is the only country to have had <a href="https://theconversation.com/power-cuts-in-south-africa-are-playing-havoc-with-the-countrys-water-system-197952">power shortages for 15 years</a>. This is because the others moved quickly to rejig their electricity supply systems. </p>
<p>All three countries followed a similar route, as have many others. They untangled their single electricity companies, focusing on keeping parts of it under state control and opening up the rest to a mix of state and private companies.</p>
<h2>Complex to manage</h2>
<p>The electricity supply system has three parts. First is generation – generating electricity at a power plant. Second is transmission – moving it from the power plant to the municipality, usually on a high voltage line. Finally, distribution is about getting it the last few metres to a house or factory.</p>
<p>High-voltage transmission is what economists call a “natural monopoly”. It is more efficient if there is a single electricity grid for an area, rather than multiple grids. This part is best managed by a central body – in many countries a state-owned company. Because the transmission business can recover costs, it can use that income to increase transmission capacity, <a href="https://www.engineeringnews.co.za/article/only-six-solar-projects-advance-to-preferred-bidder-status-following-latest-renewables-round-2022-12-08/rep_id:4136">something that is urgently needed</a>. </p>
<p>But China, Colombia and Greece all recognised that generation no longer needs to be a monopoly. Actually a monopoly in generation is bad for all the same reasons that all monopolies are bad. They typically charge more and produce less. You need a complicated regulatory system to get their prices right. Smaller generation companies are easier to manage.</p>
<p>Distribution is best left to a company as close to the end user as possible – in almost all countries, that is the municipality. In South Africa, it is a mix. For example, <a href="https://www.citypower.co.za/Pages/default.aspx">City Power</a> distributes electricity to customers in older parts of Johannesburg. But Eskom distributes electricity direct in outlying parts of the metros. </p>
<p>This means that Eskom has to do everything: generate electricity, transmit it on large power lines to the cities and then distribute it to individual customers. It is a “vertical monopoly”. This makes it a fiendishly complex company to manage. Very few countries have such an arrangement – most prefer to allow specialist businesses in each part of the system.</p>
<h2>Lessons for South Africa</h2>
<p>Here’s what happened when generation was untangled from the rest of the state-owned monopoly in China. Between 2003 and 2006, <a href="https://www.powermag.com/china-wrestles-with-power-shortages/">new generation companies</a> added over 237,500 MW to the Chinese grid. That’s the equivalent of delivering nearly 10 Eskoms in three years.</p>
<p>In 2019, the Department of Public Enterprises <a href="https://www.gov.za/sites/default/files/gcis_document/201910/roadmap-eskom.pdf">published a detailed and clear roadmap</a> to follow this route, separating Eskom into generation, transmission and distribution. Internally, <a href="https://www.eskom.co.za/eskom-divisions/">Eskom is already structured that way</a>. On 17 December 2021, the legally binding merger agreement was executed to transfer transmission to the <a href="https://www.eskom.co.za/medium-term-budget-policy-statement-unbundling-of-transmission-division/">National Transmission Company South Africa SOC Limited</a>.</p>
<p>But the very last step has not been taken, despite being <a href="https://www.energy.gov.za/files/policies/whitepaper_energypolicy_1998.pdf">government policy since 1998</a>. Every time the proposed separation comes closer to happening, there has been fierce resistance <a href="https://www.gtac.gov.za/wp-content/uploads/2022/02/Why-Lights-Went-Out-Politics-Institutions-and-Electricity-Reform.pdf">from both unions and Eskom management</a>. In 2018, it was because of loadshedding. During the years when there was no loadshedding and plants were being run too hard, it was because it was not urgent. And since the current electricity crisis, it is because there is loadshedding and Eskom <a href="https://www.engineeringnews.co.za/article/south-africa-transmission-firm-seen-hobbled-by-eskom-millstone-2022-06-21">is not financially viable</a>. But it is precisely because Eskom is in financial distress that the separation needs to be accelerated.</p>
<p>In 2023, two things make it possible to do the separation very quickly.</p>
<p>The first is <a href="https://www.eskom.co.za/resignation-of-eskom-group-chief-executive/">a new CEO</a>. If the government is serious about the separation, as it has regularly said it is, it doesn’t make sense to appoint a single new CEO. Separate CEOs should be appointed for the National Transmission Company and for the other businesses. An independent board of directors for the transmission company should also be appointed.</p>
<p>The second is a technical issue related to Eskom’s debt. At the moment, Eskom as a whole is liable for the Eskom debt. The debt holders need to consent to any change in the legal structure.</p>
<p>The national treasury has announced that approximately <a href="https://www.treasury.gov.za/legislation/bills/2023/%5BB5-2023%5D%20(Eskom%20Debt%20Relief).pdf">R254 billion (about US$14 billion) of Eskom debt</a> will be transferred to the national balance sheet in tranches over the next three years. Debt holders can be asked to approve the transfer of debt and the final piece of the restructuring at the same time. The legal and technical work has all been done – the National Transmission Company exists, and it just needs life and capital. It would have been far better to use the R254 billion (about US$14 billion) to help capitalise this critical new company.</p>
<p>Most debt holders will jump at the chance – certainty on the long promised new structure as it will go a long way to fix energy problems in the country. Also, it will improve the chances that debt holders will get their interest payments on the debt that isn’t transferred.</p>
<p>Unfortunately, <a href="https://www.treasury.gov.za/documents/National%20Budget/2023/review/Annexure%20W3.pdf#page=4">the conditions</a> that the national treasury has announced do not include the final unbundling. There is still an opportunity – the government’s conditions still have to be finalised. Eskom’s unbundling is one of the priorities of <a href="https://www.stateofthenation.gov.za/operation-vulindlela/electricity-sector">Operation Vulindlela</a>, a joint initiative of the presidency and national treasury aimed at accelerating structural reforms and measures that can support economic recovery.</p>
<p>Hopefully the government will learn from the international experience and use the R254 billion (about US$14 billion) to fundamentally fix the problem of a vertically integrated, inefficient and ineffective monopoly. And with that, end power cuts.</p><img src="https://counter.theconversation.com/content/200490/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Roy Havemann is at the Western Cape Treasury and was previously at National Treasury, He writes in his personal capacity. </span></em></p>South Africa’s minister of finance should have used the bailout of Eskom to fast-track its split and introduce the private sector into the electricity sector.Roy Havemann, Research Associate, Stellenbosch UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1955902022-12-29T05:23:35Z2022-12-29T05:23:35ZFive tips for developing and managing your budget – even in tough economic times<figure><img src="https://images.theconversation.com/files/498995/original/file-20221205-21-ak9ukz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Budgeting offers more opportunities to save money. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/paying-monthly-expenses-royalty-free-image/1227600099?phrase=personal%20budgeting&adppopup=true">Getty Images </a></span></figcaption></figure><p>There’s nothing quite like a new year to prompt us to take stock of our lives, our health, our goals – and our finances. Many people will start 2023 by contemplating how best to budget, plan and save. This is always a good set of aims, but it’s especially important in the inflation-prone and unpredictable economies we’re seeing <a href="https://www.statista.com/statistics/268225/countries-with-the-highest-inflation-rate/">all over Africa and the world</a>.</p>
<p>Budgeting is especially key. It is the most effective method to <a href="https://www.thebalancemoney.com/how-to-make-a-budget-1289587">monitor income and expenditure</a>. <a href="https://www.uslendingcompany.com/blog/key-differences-in-writing-a-household-budget-vs-a-personal-budget/">Personal budgets</a> can help you to monitor your resources in pursuit of larger financial goals. Budgeting also offers <a href="https://www.acrwebsite.org/volumes/v46/acr_vol46_2411998.pdf">more opportunities</a> to save money, reduce your debts and live a comfortable life. It can even <a href="https://prucomm.ac.uk/assets/uploads/blog/2013/04/Personal-Budgets-review-of-evidence_FINAL-REPORT.pdf">improve your mental health</a>.</p>
<p>But where should you start? What questions do you need to answer in creating a budget? Here are some tips that I’ve learned – not just as an economist, but as a research cost analyst and someone who keeps a budget too. </p>
<h2>1. Understand the broader economic conditions</h2>
<p>It is imperative that individuals keep themselves aware and up-to-date on the realities of their country’s economic landscape. You don’t have to be a professional economist, but keep an eye on new developments like free business registration, small business development funds and printing of new money notes. What is the current exchange rate? What’s the political landscape and what international factors, like the price of crude oil, are at play? You should also watch the inflation rate and have a sense of unemployment trends.</p>
<p>This economic awareness will prepare you to draft your own budget and you’ll have a sense of when external factors mean it’s time to revisit your plans.</p>
<h2>2. Review your income sources</h2>
<p>The ability to earn income is critical to sustaining livelihoods. Having a definite source of income is the bedrock of budgeting. </p>
<p>Some important questions you should ask about your income – and how you might budget with it – include:</p>
<ul>
<li> What is my current income? </li>
<li> What do I use my income for?</li>
<li> Am I able to save, given my current income?</li>
<li> What proportion of my income do I save and what proportion do I spend?</li>
<li> Do I have the capacity to earn more than this?</li>
<li> How can I improve my income?</li>
</ul>
<p>Your answers can help you to identify gaps or untapped potential. Those with irregular or unpredictable income should factor in the element of time-gap in their income, for effective budgeting. Time gap is when they are not earning income. And everyone should make allowance in their budgets for uncertainties like health issues, social engagements, inflation, unemployment, recession and price shocks. </p>
<h2>3. Appraise your expenses</h2>
<p>Expenses can be broadly categorised into “variable” and “fixed”. </p>
<p>Fixed expenses recur within a short period: housing, food, transport, medical costs, electricity, utilities, toiletries and clothing. Variable expenses are more long-term and irregular, such as investment in property or interest-yielding assets, and the purchase of machinery. </p>
<p>The main essence of revising our expenses is to analyse and possibly improve our spending habits. In reviewing our expenses, we can consider issues such as:</p>
<ul>
<li> What is the proportion of consumption-savings ratio from my income? This is how much do I spend compared to how much I save.</li>
<li> What are my regular expenses?</li>
<li> What are my fixed, capital or investment expenses?</li>
<li> What are my extraordinary expenses that need modification?</li>
<li> Have there been emergency or extraordinary expenses?</li>
</ul>
<p>A careful response to the issues raised above offers an occasion to re-evaluate the pattern and direction of our expenses. For instance, overspending, unplanned or extraordinary expenses can be identified. This can lead to an optimal, efficient reallocation of available resources.</p>
<h2>4. Stabilise your finances through savings</h2>
<p>Savings have been <a href="https://klinglercpa.com/bedrock-principles-for-saving-money/">described</a> as a financial stabiliser, given their potential to cater for urgent needs and create opportunities for investments. </p>
<p>Of course, savings have more value when they grow faster than the rate of inflation. Inflation erodes the value of savings. For instance, an amount of 300,000 naira (US$676) saved to purchase an autorickshaw today may be impossible in two months’ time with an inflation rate of 10% when the tricycle price rises to 330,000 naira (US$744). The reverse is the case when there is deflation. </p>
<p>Therefore, it is advisable to improve the value of savings through investments in interest-yielding assets such as stocks, shares, bonds, microfinance and production. </p>
<p>That’s not to say it’s always easy to save. Many income earners spend as they go, not seeing savings as part of their budgets. Harsh economic realities can also make it difficult – sometimes seemingly impossible – to save. But it’s not impossible: savings can be made in small amounts, through a daily, weekly or monthly contribution to collections, cooperative schemes or microfinance affiliations. For instance, a point of sale business in Nigeria can permit a daily contribution of 500 naira (US$1.13) over 25 work days, giving an average saving of 12,500 naira (US$28.18) per month. </p>
<p>The Point-of-Sale business started in Nigeria in 2013 when the Central Bank of Nigeria introduced the agent banking system. A POS agent operates and processes transactions through a POS service provider. Providers of such services include banks, microfinance banks and fintech companies.</p>
<h2>5. Run a flexible budget</h2>
<p>Once your budget is created, remember that it’s not set in stone. It should be flexible if anything changes in your life. For instance, an amount saved to buy a car can be invested in a promising venture buying shares through public offerings or private placements in multinational organisations like Nestle or Unilever. </p>
<p>Also, health emergencies or career advancement programmes can require taking some money out of our savings. </p>
<p>In all, budgeting should be flexible enough to incorporate exigencies, especially when catering for the current situation will culminate into a greater good.</p><img src="https://counter.theconversation.com/content/195590/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Oluwabunmi Adejumo does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Budgets are imperative for people to manage their resources and attain financial goals.Oluwabunmi Adejumo, Lecturer/Researcher, Obafemi Awolowo UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1933802022-10-27T19:05:43Z2022-10-27T19:05:43ZMoney for dams dries up as good water management finally makes it into a federal budget<figure><img src="https://images.theconversation.com/files/492016/original/file-20221027-23859-8g7fsa.jpg?ixlib=rb-1.1.0&rect=8%2C25%2C5551%2C3675&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Wyangala Dam</span> <span class="attribution"><span class="source">AAP Image/Lukas Coch</span></span></figcaption></figure><p>A story from the early days of the Abbott government still circulates in the halls of Parliament House.</p>
<p>The government’s Expenditure Review Committee apparently supported then Minister for Agriculture Barnaby Joyce’s first A$500 million budget funding for the National Party’s dam-building plans, over then Treasurer Joe Hockey’s objections. Hockey reputedly said to Joyce “good luck with that, I don’t think you’ll build one of them”. If true then Joe, take a cigar.</p>
<p>In our land of drought and flooding rains, better water management should feature in every federal budget. Thankfully, the budget handed down by Treasurer Jim Chalmers on Tuesday delivers it.</p>
<p>It slashes spending on big dams and elevates the role of science in water decision-making. It also positions Labor to undertake further reform in the Murray-Darling Basin by buying back more water from farmers to improve the health of the rivers, and manage the impacts of climate change.</p>
<p>These measures promise to deliver more sustainable use of water in Australia’s most economically important and exploited river system. But they also buy a fight with some quarters of the farming community, and the New South Wales and Victorian governments.</p>
<h2>Nationals set about building dams</h2>
<p>Dams are a talisman for Australians <a href="https://journals.sagepub.com/doi/full/10.1177/0725513618821970">who believe</a> development and the conquest of nature is essential to nation-building. </p>
<p>The National Party arguably exemplifies this ideology. It gained control of the water portfolios in the former federal government and current NSW government and set about trying to <a href="https://barnabyjoyce.com.au/opinion-piece">build dams</a>, especially in the Murray-Darling Basin.</p>
<p>The Liberal Party has conceded to National Party demands on water even though the <a href="https://www.dcceew.gov.au/water/policy/policy/nwi">National Water Initiative</a>, established by the Coalition in 2004, <a href="https://www.dcceew.gov.au/sites/default/files/sitecollectiondocuments/water/Intergovernmental-Agreement-on-a-national-water-initiative.pdf">stipulates</a>:</p>
<blockquote>
<p>proposals for investment in new or refurbished water infrastructure […] be assessed as economically viable and ecologically sustainable prior to the investment occurring.</p>
</blockquote>
<p>This week’s budget wields a long overdue axe to dam proposals from Coalition governments, saving <a href="https://budget.gov.au/2022-23-october/content/bp1/download/bp1_2022-23.pdf">$1.7 billion over four years</a>. Two of the most controversial dam proposals in the Murray-Darling Basin are among those axed or indefinitely postponed. </p>
<p>First is the <a href="https://www.theguardian.com/australia-news/2022/aug/17/dungowan-dam-likely-dead-in-the-water-after-infrastructure-australia-deems-proposal-low-priority">$1.27 billion</a> Dungowan proposal near Tamworth in NSW. <a href="https://www.pc.gov.au/inquiries/completed/water-reform-2020/report">It was slammed</a> by the Productivity Commission as excessively expensive and the leading example of poor water infrastructure decision making. </p>
<p>Second is the hugely expensive - up to <a href="https://www.abc.net.au/news/2022-05-18/wyangala-dam-wall-raising-missing-from-election-campaign-/101072664">$2.1 billion at last estimate</a> - raising of Wyangala Dam, near Cowra. In 2021 a NSW <a href="https://www.parliament.nsw.gov.au/committees/inquiries/Pages/inquiry-details.aspx?pk=2614#tab-reportsandgovernmentresponses">parliamentary inquiry</a> found the proposal was “yet to demonstrate the cost effectiveness and water yield benefits of the project”.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/labors-sensible-budget-leaves-australians-short-changed-on-climate-action-heres-where-it-went-wrong-193215">Labor's 'sensible' budget leaves Australians short-changed on climate action. Here's where it went wrong</a>
</strong>
</em>
</p>
<hr>
<p>Further, $153.8 million of unallocated funding in former “water efficiency” projects in the basin has been (somewhat ambiguously) “re-profiled”. These efficiency projects have been <a href="https://www.tandfonline.com/doi/full/10.1080/13241583.2019.1579965">criticised as</a> double-counting water at the expense of the environment, being very expensive and subsidising irrigators. </p>
<p>Importantly, Labor has quietly sought to lock a commitment to better governance with transparent environmental and socio-economic assessment standards in a new <a href="https://www.nationalwatergrid.gov.au/sites/default/files/documents/investment-framework-october-2022.pdf">National Water Grid Investment Framework</a>.</p>
<h2>Science and the Murray-Darling Basin</h2>
<p>Labor has allocated $51.9 million over five years to strengthen the Murray-Darling Basin Plan “by updating the science to account for the impacts of climate change and restore trust and transparency in water management”.</p>
<p>This spending is timely. The past decade and more has seen risk-averse government agencies commission water research through narrow briefs to the government-owned CSIRO and other contractors. In one instance, the South Australian Royal Commission into the <a href="https://apo.org.au/sites/default/files/resource-files/2019-01/apo-nid217606.pdf">Murray-Darling Basin</a> described this research as “improperly pressured” and representing “maladministration”.</p>
<p>The situation worsened when the research program into better water management commissioned by the independent National Water Commission was <a href="https://www.water-alternatives.org/index.php/alldoc/articles/volume-13/issue-1/561-a13-1-1">axed under Abbott</a> in 2014.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/excessive-water-extractions-not-climate-change-are-most-to-blame-for-the-darling-river-drying-192621">Excessive water extractions, not climate change, are most to blame for the Darling River drying</a>
</strong>
</em>
</p>
<hr>
<p>This has resulted in science that may not be independently peer-reviewed and often doesn’t address the big questions.</p>
<p>For instance, after allocating around <a href="https://www.dcceew.gov.au/water/policy/programs/water-reform">$13 billion</a> for water management reforms in the basin since 2008, governments still can’t tell the public:</p>
<ul>
<li><p>why water inflows into South Australia are about <a href="https://wentworthgroup.org/2020/09/mdb-flows-2020/">22% lower</a> than basin modelling projected (excluding climatic variability)</p></li>
<li><p>the area and types of <a href="https://doi.org/10.1071/MF20172">wetlands watered</a> each year </p></li>
<li><p>if <a href="https://doi.org/10.1071/MF21057">threatened species populations</a> are recovering. </p></li>
</ul>
<p>Further, water institutions in the basin do not currently adequately <a href="https://www.sciencedirect.com/science/article/abs/pii/S146290112030215X">address the threat</a> of climate change.</p>
<h2>Returning water to the rivers</h2>
<p>Measures to implement the basin plan are meant to be complete in mid-2024. Consequently, allocated funding for all Basin water reforms was due to decline markedly after this point. Yet, major and expensive elements of the plan have still <a href="https://www.abc.net.au/news/2022-05-03/reckoning-coming-for-murray-darling-basin-plan/101020756">not been implemented</a>.</p>
<p>In just one example, the Victorian and NSW governments were supposed <a href="https://www.tandfonline.com/doi/full/10.1080/13241583.2020.1832723">to reach agreements</a> and pay over 3,300 riverside land owners to fill river channels and allow water to spill safely onto the lower-most floodplains. This would conserve nearly 375,000 hectares of wetlands, and maximise conservation of flora and fauna with the limited volume of available environmental water. </p>
<p>However, since 2013 the state governments have failed to make a single agreement with land owners.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/492026/original/file-20221027-12-vkvslq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A river on a sunny day, behind two big trees" src="https://images.theconversation.com/files/492026/original/file-20221027-12-vkvslq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/492026/original/file-20221027-12-vkvslq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/492026/original/file-20221027-12-vkvslq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/492026/original/file-20221027-12-vkvslq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/492026/original/file-20221027-12-vkvslq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/492026/original/file-20221027-12-vkvslq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/492026/original/file-20221027-12-vkvslq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Murrumbidgee river at Yanga Woolshed, a major tributary of the Murray-Darling Basin.</span>
<span class="attribution"><span class="source">Jamie Pittock</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Hundreds of billions of litres of water that were supposed to have been reallocated to the environment are still missing. The latest federal budget describes the lack of water recovery for the environment as an unquantified “fiscal risk”. </p>
<p>Waving a big stick, Labor has allocated initial funding for meeting the environmental water targets in the plan. The amount of the funding has not been disclosed. It could involve purchasing water entitlements from farmers who volunteer to sell them – a move deeply <a href="https://www.theguardian.com/australia-news/2022/oct/27/farmers-gear-up-to-fight-water-buybacks-as-federal-budget-allocates-funding-to-meet-murray-darling-targets">opposed by</a> the state governments and the irrigation industry.</p>
<p>The budget also funds repairs to other broken elements of the basin’s water governance. After a decade of cuts, the now Department of Climate Change, Energy, the Environment and Water <a href="https://budget.gov.au/2022-23-october/content/bp2/index.htm">will have funding</a> restored to, among other goals, improve “the health of our rivers and freshwater ecosystems”.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australia-has-an-ugly-legacy-of-denying-water-rights-to-aboriginal-people-not-much-has-changed-141743">Australia has an ugly legacy of denying water rights to Aboriginal people. Not much has changed</a>
</strong>
</em>
</p>
<hr>
<p>There is also money to start work on re-establishing a National Water Commission, and <a href="https://budget.gov.au/2022-23-october/content/bp1/index.htm">to reform</a> the much criticised water trading markets to make them more transparent and robust. </p>
<p>Finally, the budget allocates $40 million to begin addressing the appalling dispossession of water from Indigenous peoples, who now hold <a href="https://www.tandfonline.com/doi/full/10.1080/13241583.2021.1970094?src=recsys">just 0.17%</a> of surface water entitlements in the basin. It’s a small but important first step for water justice.</p><img src="https://counter.theconversation.com/content/193380/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jamie Pittock is a member of the Wentworth Group of Concerned Scientists, and is a member of and advises a number of other environmental non-government organizations. Many moons ago he received funding from the National Climate Change Adaptation Research Facility (RIP) for research on on climate change adaptation in the Murray-Darling Basin.</span></em></p>In our land of drought and flooding rains, better water management should feature in every federal budget. The new budget delivers it – but not everyone is happy.Jamie Pittock, Professor, Fenner School of Environment & Society, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1930102022-10-26T23:36:51Z2022-10-26T23:36:51ZThe government hopes private investors will help save nature. Here’s how its scheme could fail<figure><img src="https://images.theconversation.com/files/491797/original/file-20221026-25-d7sx1j.jpg?ixlib=rb-1.1.0&rect=23%2C31%2C5152%2C3414&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Seiichiro/Unsplash</span></span></figcaption></figure><p>This week’s federal budget reiterated the government’s plan to establish a new scheme for encouraging private investment in conservation, called a <a href="https://www.dcceew.gov.au/sites/default/files/documents/emm-communique-21-oct-2022.pdf">biodiversity market</a> (now, rebranded to a “<a href="https://www.dcceew.gov.au/sites/default/files/documents/emm-communique-21-oct-2022.pdf">nature repair</a>” market).</p>
<p>A biodiversity market would see landholders granted <a href="https://www.pm.gov.au/media/biodiversity-certificates-increase-native-habitat-and-support-australian-landholders">certificates</a> for restoring or managing local habitats. Landholders could then sell these certificates to, for instance, businesses.</p>
<p>But the effectiveness of such schemes overseas and in Australia can at best be described as <a href="https://conbio.onlinelibrary.wiley.com/doi/full/10.1111/conl.12664">mixed</a>. Whether biodiversity markets can actually improve the dire trajectory of our native plants and animals depends heavily on two things: </p>
<ol>
<li>whether they reward environmental stewardship, which delivers overall benefits for biodiversity or</li>
<li>whether they rely on the use of “<a href="https://theconversation.com/can-we-really-restore-or-protect-natural-habitats-to-offset-those-we-destroy-121213">offsets</a>”, and the loss of biodiversity elsewhere, to generate market demand. </li>
</ol>
<p>Unfortunately, the government is <a href="https://www.canberratimes.com.au/story/7949899/biodiversity-market-has-huge-potential-for-rorting-and-greenwashing-expert/">sending mixed messages</a> on this critical issue. Federal Environment Minister Tanya Plibersek <a href="https://www.abc.net.au/news/2022-09-01/australia-hopes-to-create-green-wall-street-with-credit-scheme/101392808">has said</a> while the market “is not designed to be an offset scheme”, companies could still buy certificates to compensate for damage they cause to nature.</p>
<p>In submissions to the recent public consultation on the proposed market, <a href="https://www.unsw.adfa.edu.au/sites/default/files/documents/Evans_National%20Biodiversity%20Market_submission%20final.pdf">we</a> and <a href="https://www.edo.org.au/wp-content/uploads/2022/09/220916-Biodiversity-Markets-EDO-submission.pdf">other</a> <a href="https://wentworthgroup.org/wp-content/uploads/2022/09/Wentworth-Group-Biodiversity-Market-Submission-21-Sep.pdf">experts</a> argued the scheme should explicitly rule out the use of certificates as compliance offsets for biodiversity damage. Here, we give three major reasons why this is important.</p>
<h2>What sort of market?</h2>
<p>The term “biodiversity market” refers to a range of approaches that can operate quite differently.</p>
<p>For example, “<a href="https://theconversation.com/heres-a-good-news-conservation-story-farmers-are-helping-endangered-ecosystems-60794">environmental stewardship schemes</a>” reward land managers who benefit native ecosystems, such as by planting trees and restoring rivers. </p>
<p>“<a href="https://www.impactmitigation.org/videos/introduction-to-biodiversity-offsetting">Biodiversity offset schemes</a>” similarly offer financial incentives to land managers, but with a critical difference: on-ground work to benefit nature is used to offset, or compensate for, biodiversity losses elsewhere. </p>
<p>This means offsets don’t usually result in overall improvements to nature, but rather <a href="https://theconversation.com/biodiversity-offsets-could-be-locking-in-species-decline-14177">maintain existing declines</a>. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/ehso8_tRU-k?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Introduction to biodiversity offsetting. Video: Threatened Species Recovery Hub</span></figcaption>
</figure>
<p>The government hopes voluntary private sector demand will drive this biodiversity market. This is because the government says it cannot afford the <a href="https://invasives.org.au/wp-content/uploads/2022/04/Averting-extinctions-The-case-for-strengthening-Australias-threat-abatement-system-April-2022.pdf">A$1-2 billion a year needed</a> to adequately protect Australia’s natural environments and reverse biodiversity decline. </p>
<p>This sounds like a lot, but let’s put $1 billion into perspective.</p>
<p>It’s about one-tenth of the public money spent every year <a href="https://theconversation.com/we-pay-billions-to-subsidise-australias-fossil-fuel-industry-this-makes-absolutely-no-economic-sense-189866">subsiding</a> fossil fuel extraction in this country. It’s about <a href="https://www.abc.net.au/news/2022-04-01/cancelled-french-submarine-program-cost-billions/100959082">a fifth</a> of the cost of cancelling the submarine contract with France. </p>
<p>And it’s about <a href="https://www.abc.net.au/news/2022-10-20/jim-chalmers-stage-three-tax-cut-cost-blowout/101555300">a 25th</a> of the annual cost of the stage three tax cuts promised in this week’s federal budget. </p>
<hr>
<p>
<em>
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Read more:
<a href="https://theconversation.com/we-pay-billions-to-subsidise-australias-fossil-fuel-industry-this-makes-absolutely-no-economic-sense-189866">We pay billions to subsidise Australia’s fossil fuel industry. This makes absolutely no economic sense</a>
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<p>It is completely unknown, however, whether businesses will want to voluntarily purchase enough biodiversity certificates purely for <a href="https://www.investopedia.com/terms/c/corp-social-responsibility.asp">corporate social responsibility</a> to make the market work. </p>
<p>On the other hand, allowing businesses to use the certificates for legally-required offsets now – or sometime in the future – will certainly generate more immediate market demand. But this would open up the market to a host of problems, and ultimately undermine its very purpose: to improve biodiversity. </p>
<h2>Three reasons to rule out offsets</h2>
<p>First, almost all biodiversity offsets in Australia are legally required as conditions of approving new developments, under environmental policies and laws. These policies have strict requirements – and for good reason. </p>
<p>For example, offsets must be “<a href="https://www.youtube.com/watch?v=-fGPwTYy2Tw&t=192s">like for like</a>”. In other words, the compensation must be for the same type of biodiversity as the loss. </p>
<p>Such like-for-like requirements limit the number of possible trades in a market, <a href="https://www.sciencedirect.com/science/article/pii/S0006320720309198">but are crucial</a> to protect Australia’s most threatened species. Otherwise, for instance, allowing replanted koala habitat to count as compensation for the loss of cassowary habitat simply means cassowaries are more likely to become extinct. </p>
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Read more:
<a href="https://theconversation.com/can-we-really-restore-or-protect-natural-habitats-to-offset-those-we-destroy-121213">Can we really restore or protect natural habitats to 'offset' those we destroy?</a>
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<p>The problem is that biodiversity certificates will certify <em>activities</em> (such as tree planting or fencing), rather than specific <em>outcomes</em> (such as increased population size) for particular species or ecosystems. </p>
<p>So it’s not clear how these certificates could be used to compensate for biodiversity losses in line with the <a href="https://www.dcceew.gov.au/environment/epbc/publications/epbc-act-environmental-offsets-policy">national environmental law</a>. </p>
<p>Second, the new biodiversity market is sold as a good news story: willing land managers creating benefits to nature that the private sector wants to support, to help turn around Australia’s atrocious environmental record. </p>
<p>But in practice, offsets have never been a good news story, with <a href="https://www.theguardian.com/environment/2021/oct/22/nsw-environmental-offsets-failing-to-halt-wildlife-decline-inquiry-told">scheme failure</a>, <a href="https://citynews.com.au/2014/volunteers-feel-duped-land-greed/">misapplication</a> and <a href="https://www.theguardian.com/environment/2021/apr/16/enormous-sum-of-money-40m-windfall-from-nsw-environmental-offsets-sparks-calls-for-inquiry">abuse</a> regularly making headlines. Including offsets in the mix might scare off buyers and sellers. </p>
<p>Third, offsets are legal requirements, so a market that encourages a land manager to supply them <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/emr.12330">achieves no additional benefit</a> for the environment through that trade. It may become cheaper for businesses to acquit their current or future compliance obligations – but it would be a zero sum game for biodiversity. </p>
<h2>A better way forward</h2>
<p>The proposed biodiversity market is a central response to Australia’s damning <a href="https://soe.dcceew.gov.au/">State of the Environment report</a> earlier this year. </p>
<p>But previous government attempts to attract private investment to encourage biodiversity have <a href="https://www.anao.gov.au/work/performance-audit/funding-models-threatened-species-management#:%7E:text=In%20February%202017%20the%20Australian,and%20conservation%20and%20community%20groups.">fallen flat</a>, so it would be wise to learn from these experiences. </p>
<p>A better way to stimulate market demand is for the federal government to make an initial public investment in protecting biodiversity to <a href="https://www.theguardian.com/commentisfree/2020/jul/21/the-magic-of-the-market-wont-help-the-environment-unless-government-also-takes-responsibility">boost private sector confidence</a>. The <a href="https://statements.qld.gov.au/statements/90611">Queensland government</a> did this in 2020, when it announced a $500 million Land Restoration Fund. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/labors-plan-to-save-threatened-species-is-an-improvement-but-its-still-well-short-of-what-we-need-191845">Labor's plan to save threatened species is an improvement – but it's still well short of what we need</a>
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<p>Another source of risk is that the government <a href="https://www.pm.gov.au/media/biodiversity-certificates-increase-native-habitat-and-support-australian-landholders">proposes</a> the Clean Energy Regulator would be responsible for the biodiversity market, as well as for Australia’s carbon credit scheme. It seems wise to await the findings of the current <a href="https://minister.dcceew.gov.au/bowen/media-releases/independent-review-accus">independent review</a> into Australia’s carbon scheme before loading complex new responsibilities onto the carbon market regulator. </p>
<p>We argue that instead, the biodiversity market should be administered by a specialised regulator – such as the proposed new <a href="https://www.theguardian.com/australia-news/2022/may/20/labor-to-set-up-independent-environmental-protection-agency-and-restore-trust-and-confidence">Environmental Protection Agency</a>.</p>
<p>This market is <a href="https://theconversation.com/labors-biodiversity-market-scheme-needs-to-be-planned-well-or-it-could-lead-to-greenwashing-189557">not a silver bullet</a>. It is also no substitute for <a href="https://conbio.onlinelibrary.wiley.com/doi/pdf/10.1111/conl.12682">adequate public investment </a> or <a href="https://theconversation.com/bad-and-getting-worse-labor-promises-law-reform-for-australias-environment-heres-what-you-need-to-know-186562">law reforms needed</a> to stop nature declining in the first place. </p>
<p>But if it’s carefully designed, with an initial investment from the federal government as a kick-start, a biodiversity market for genuine additional benefits to nature could prove its worth. </p>
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Read more:
<a href="https://theconversation.com/labors-biodiversity-market-scheme-needs-to-be-planned-well-or-it-could-lead-to-greenwashing-189557">Labor's biodiversity market scheme needs to be planned well – or it could lead to greenwashing</a>
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<img src="https://counter.theconversation.com/content/193010/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Megan C Evans receives funding from the Australian Research Council through a Discovery Early Career Research Award and has previously been funded by the Department of Agriculture, Water and the Environment, WWF Australia, and the National Environmental Science Program's Threatened Species Recovery Hub.</span></em></p><p class="fine-print"><em><span>Martine Maron has received funding from various sources including the Australian Research Council, the Queensland Department of Environment and Science, and the Australian Government's National Environmental Science Program, and advises both state and federal government on offset policy. She is a member of the Wentworth Group of Concerned Scientists, President of BirdLife Australia, and a Governor of WWF-Australia.</span></em></p>The nature repair market is sold as a good news story: willing land managers benefiting nature with support from the private sector. But if offsets are part of it, the reality could be very different.Megan C Evans, Senior Lecturer and ARC DECRA Fellow, UNSW SydneyMartine Maron, Professor of Environmental Management, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1933042022-10-26T04:16:14Z2022-10-26T04:16:14ZThis was supposed to be a ‘wellbeing budget’ – so why does it feel like the arts have been overlooked?<p>The first Labor federal budget has come down, but the arts are almost nowhere to be seen. </p>
<p>According to Arts Minister Tony Burke, the government is waiting for its <a href="https://www.abc.net.au/news/2022-08-25/australia-new-national-cultural-policy-arts-minister-tony-burke/101363244">new cultural policy</a>, to be delivered later this year. </p>
<p>Only then will we know if the government is going to take any real action to address the disastrous issues in the arts sector.</p>
<p>Given the emphasis in the budget on addressing issues around “<a href="https://theconversation.com/wellbeing-its-why-labors-first-budget-will-have-more-rigour-than-any-before-it-187160">wellbeing</a>”, it is worrisome we have longer to wait before issues in the arts are addressed by the Labor government. </p>
<p>It took the Coalition government more than seven months to announce <a href="https://theconversation.com/too-little-too-late-too-confusing-the-funding-criteria-for-the-arts-covid-package-is-a-mess-145397">any real relief</a> to the sector during COVID, by which time many individuals and organisations had given up. Timing is everything when people are desperate.</p>
<p>What are the issues in the arts? Where do we start?</p>
<p>There is the continued <a href="https://theconversation.com/federal-arts-funding-in-australia-is-falling-and-local-governments-are-picking-up-the-slack-124160">funding decline</a> and support of the arts over the past 15 years, the defunding of <a href="https://www.theguardian.com/culture/2020/apr/06/we-are-witnessing-a-cultural-bloodbath-in-australia-that-has-been-years-in-the-making">respected arts organisations</a> by the Australia Council since 2016, the <a href="https://www.theguardian.com/culture/2016/may/19/the-70-drop-australia-council-grants-artists-funding-cuts">dramatic decline</a> in funding support for individual artists, the <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/House/Communications/Arts/Report/section?id=committees%2freportrep%2f024535%2f78295">dire impact</a> of the pandemic, and the need to recognise that cultural value is not the same as economic value, and both are needed. </p>
<p>Individuals who work in the arts are highly skilled and talented. Acknowledging their labour as important and valuable is just the beginning. </p>
<p>Our artists are another aspect of our national wealth. Australia cannot afford to ignore them.</p>
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Read more:
<a href="https://theconversation.com/everything-you-need-to-know-about-labors-first-budget-in-6-charts-192851">Everything you need to know about Labor's first budget in 6 charts</a>
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<h2>The small budget measures</h2>
<p>Nevertheless, the government has taken action <a href="https://edm.arts.gov.au/link/id/zzzz6358681e8d16a669Pzzzz57fd70ef2def1829/page.html">in some areas</a>. </p>
<p>This budget sees:</p>
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<li><p>A$83.7 million in restorative funding to the ABC</p></li>
<li><p>$5 million to the <a href="https://edm.arts.gov.au/link/id/zzzz6358681e96d03256Pzzzz57fd70ef2def1829/page.html">National Aboriginal and Islander Skills Development Association Dance College</a></p></li>
<li><p>$2.4 million to <a href="https://edm.arts.gov.au/link/id/zzzz6358681e97fc8205Pzzzz57fd70ef2def1829/page.html">Bundanon</a>, an organisation providing artist residencies, an education centre, a gallery and other facilities in regional New South Wales</p></li>
<li><p>$5 million to the <a href="https://edm.arts.gov.au/link/id/zzzz6358681e991bc782Pzzzz57fd70ef2def1829/page.html">National Institute of Dramatic Art</a> (NIDA) to support ongoing delivery of its courses, and</p></li>
<li><p>$2.4 million over four years from 2022-23 to offset the impact of the efficiency dividend on <a href="https://edm.arts.gov.au/link/id/zzzz6358681e9a735443Pzzzz57fd70ef2def1829/page.html">national performing arts training organisations</a>.</p></li>
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<p>The budget also reflects the merging of Creative Partnerships Australia with the Australia Council.</p>
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Read more:
<a href="https://theconversation.com/jim-chalmers-2022-23-budget-mantra-whatever-you-do-dont-fuel-inflation-192846">Jim Chalmers’ 2022-23 budget mantra: whatever you do, don’t fuel inflation</a>
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<h2>Creative Partnerships Australia</h2>
<p>Creative Partnerships Australia costs the government around $4-5 million a year, so this merging will bring around $15 million to the Council over the next three years. </p>
<p>Creative Partnerships Australia grew out of the Australian Business Arts Foundation (AbaF), an initiative of the Howard government. Its mandate was to promote and facilitate private sector support for the arts and initially it focused on encouraging businesses to engage with the arts. </p>
<p>From 1998 to 2012, AbaF was driven through a council of business representatives, who committed $10,000 each and actively advocated for business partnerships with arts organisations. This council provided a rich resource base of potential benefactors and in its early days <a href="https://www.businessnews.com.au/article/AbaF-support-passes-20m">was successful</a> at doing this. A separate arts philanthropy organisation, Artsupport Australia, sat under the Australia Council with AbaF support.</p>
<p>In 2012 Simon Crean, then arts minister, decided to excise Artsupport Australia from the Australia Council and re-orientate AbaF by <a href="https://www.danceaustralia.com.au/news/new-body-to-promote-private-arts-support">rebranding it</a> as Creative Partnerships Australia. Creative Partnerships Australia since then has had a primary focus on philanthropic support for the arts, and unlike AbaF, also distributes Commonwealth funds through grant programs.</p>
<p>Unlike the Australia Council, Creative Partnerships Australia is based in Melbourne (rather than Sydney), with staff also located in other cities. This means it has more immediate contact with its arts constituents outside Sydney. </p>
<p>The organisation has run many workshops over the years to develop fundraising skills for the arts, and has also been the home of the <a href="https://australianculturalfund.org.au/about/">Australian Cultural Fund</a>, which allows for donations to be given to individual artists and organisations that do not have tax deductibility status. </p>
<p>The loss of this stand-alone entity will likely be felt more by the smaller organisations and individuals than the larger ones. Larger organisations have no difficulty in claiming tax deductibility and greater likelihood of making connections with donors.</p>
<p>The Australia Council is a grant giving body, and has not historically facilitated philanthropy nor been a conduit for tax deductibility. It remains to be seen how these functions will be folded into the Australia Council.</p>
<p>The Labor government has a lot to do to restore confidence in the arts sector and help the sector recover from several terrible years. There is an urgency to this, but this urgency is nowhere to be seen in this budget.</p>
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Read more:
<a href="https://theconversation.com/jim-chalmers-restraint-budget-the-first-stage-of-a-marathon-for-the-treasurer-192841">Jim Chalmers' 'restraint' budget the first stage of a marathon for the treasurer</a>
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<img src="https://counter.theconversation.com/content/193304/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jo Caust has previously received from the Australia Council. She is a member of NAVA and the Arts Industry Council (SA).</span></em></p>Arts Minister Tony Burke says the government is waiting for its new cultural policy. But artists are struggling now.Jo Caust, Associate Professor and Principal Fellow (Hon), School of Culture and Communication, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1928512022-10-25T09:44:17Z2022-10-25T09:44:17ZEverything you need to know about Labor’s first budget in 6 charts<figure><img src="https://images.theconversation.com/files/491268/original/file-20221024-18-ht0ihu.png?ixlib=rb-1.1.0&rect=0%2C11%2C4000%2C1982&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">AAP/The Conversation, CC BY-ND
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<p>This Budget makes hard decisions for hard times.</p>
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<p>Jim Chalmers’ first speech as treasurer outlines the enormity of the global economic situation – inflation, energy and supply chain issues, and a continuing war in Europe – and signposts that this is a budget that’s much more about what he’s taking away (or reallocating) than new announcements. </p>
<p>It’s not often we get two budgets in the one year, and this one is in stark contrast to the Coalition’s before the election.</p>
<p>On the positive side, the deficit is forecast to be just <a href="https://theconversation.com/budget-deficit-this-financial-year-to-be-36-9-billion-193109">$36.9 billion this</a>, compared to $78 billion predicted in March. A lot of this turnaround has to do with booming coal and iron ore export prices, but also the significant cuts Labor is making to some of the Coalition’s big promises in March.</p>
<p>While this is good news for a new government, the deficit will actually rise back to $49.6 billion by the end of the budget forecasts as the costs of things like the NDIS and servicing debt in an increasingly expensive global market increase.</p>
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<p>The March budget very optimistically forecast that we’d see the end of runaway inflation effectively by the time of the election, but the government assumes the consumer price index will continue to rise to 7.75% by the of the year, and take another 18 months to cool down. </p>
<p>As part of this, Treasury is assuming a 20% increase in electricity bills by mid next-year, and a further 30% by July 2024. It also expects gas to increase by 20% over the next two years.</p>
<p>So while this budget continues to assume the wage price index will turnaround within the next four years, and slowly pass inflation, most of us are unlikely to see a massive reprieve from cost of living pressures any time soon.</p>
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<p>The government is assuming GDP will continue to dip down over the next few years, hitting 1.5% by mid-2024, but trending up again by end of the forward estimates.</p>
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<p>After more than a decade of low interest rates globally, interest rates are starting to bite Australians – and the Australian government. </p>
<p>The cost of servicing government debt interest payments is forecast to have a significant impact on the budget by the end of the decade, which means the government will likely have to factor this into how they spend for the duration of this term – or how they raise revenue.</p>
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<p>And while payments are set to come down after the extreme costs of the COVID response, receipts are also likely to stay flat over the duration of the budget forecasts.</p>
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<p>Many of the key spending announcements in this budget were promises Labor took to the election or have announced in the past week. The government is adding $9.7 billion in net spending over four years, but they’re simultaneously cutting significantly – so this is actually much less than it could be for the promises made. </p>
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Read more:
<a href="https://theconversation.com/jim-chalmers-2022-23-budget-mantra-whatever-you-do-dont-fuel-inflation-192846">Jim Chalmers’ 2022-23 budget mantra: whatever you do, don’t fuel inflation</a>
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<p>And many of the costs from the March budget that the Coalition took to the May election are not yet spent – or legislated. The government expects to save $3.6 billion alone over the next four years by reducing the outsourcing of labour, advertising, travel and legal expenses.</p>
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<p>The treasurer also signalled this budget was “the beginning of something new and responsible”, and this is the first time the government has included a wellbeing statement as part of the budget papers.</p>
<p>As a way of defining the problem and the targets, it included a table to show where Australia sat against other countries in the OECD. </p>
<p>While there’s no attempt to give an overall measure, Australia is at or better than the OECD average on 21 of 37 indicators – which means there’s still some room for improvement, but at least we’re measuring the problem.</p>
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Read more:
<a href="https://theconversation.com/the-beginning-of-something-new-how-the-2022-23-budget-does-things-differently-192850">‘The beginning of something new’: how the 2022-23 budget does things differently</a>
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<img src="https://counter.theconversation.com/content/192851/count.gif" alt="The Conversation" width="1" height="1" />
We sifted through the budget papers so you don’t have to. Here are the main takeaways at a glance.Wes Mountain, Social Media + Visual Storytelling EditorLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1928462022-10-25T08:36:18Z2022-10-25T08:36:18ZJim Chalmers’ 2022-23 budget mantra: whatever you do, don’t fuel inflation<figure><img src="https://images.theconversation.com/files/491519/original/file-20221025-1583-a05inm.png?ixlib=rb-1.1.0&rect=17%2C0%2C3640%2C2000&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Wes Mountain/The Cartoon</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>Terrified by the prospect of further stoking the worst inflation in three decades, Treasurer Jim Chalmers and Finance Minister Katy Gallagher have delivered a budget that takes out of the economy about as much as it pumps into it.</p>
<p>In the March 2022-23 budget, delivered ahead of the May election, the Coalition gave away most of the extra A$40 billion that was to flow from higher commodity prices and an improved economy in new programs and tax cuts. But this budget has hung on to the bulk of what’s turned out to be an extra $52.5 billion.</p>
<p>Over the four years to 2025-26, Chalmers forecasts $144.6 billion more in tax than was expected in March. Most of this is from much higher company tax flowing from higher mineral and gas prices. This is offset by $92.1 billion in extra spending, mainly necessitated by higher inflation.</p>
<p>Out of the net $52.5 billion he plans to spend only a net $9.8 billion, most of which is $7.4 billion in recovery funding for communities affected by disasters.</p>
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<p>Labor has largely paid for its election spending promises (all of which appear to have been implemented in full) by hacking into Coalition programs and spending announced in the March budget that hasn’t yet taken place.</p>
<p>Although the monthly measure of inflation has been falling – to 6.8% for the year to August (with the September update due on Wednesday) – the budget forecasts a reacceleration to a peak of 7.75% by the end of the year.</p>
<p>It expects retail electricity prices to climb by 20% this year and a further 30% in 2023–24. It expects retail gas prices to climb 20% in both years. It says these higher prices should flow through into the cost of almost everything we buy.</p>
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Read more:
<a href="https://theconversation.com/jim-chalmers-restraint-budget-the-first-stage-of-a-marathon-for-the-treasurer-192841">Jim Chalmers' 'restraint' budget the first stage of a marathon for the treasurer</a>
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<p>Nevertheless, as international price pressures ease and as higher Reserve Bank interest rates squeeze spending, it expects inflation to fall back to 5.75% by mid next year, 3.5% by mid-2024 and (perhaps optimistically) to the middle of the Reserve Bank’s 2-3% target band by mid-2025.</p>
<p>Encouragingly, it expects wage growth to accelerate almost immediately, from its present 2.6% to 3.75% by the middle of next year, taking wages growth back up above prices growth of 3.5% by mid-2024.</p>
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<p>Whether or not this slow glide down from higher inflation and quick lift in wages growth is realistic, many of the assumptions in Chalmers’ first budget are more believable than those of his predecessors.</p>
<p>Previous budgets made their forecasts look better by plugging in high productivity growth of 1.5% per year, which has been the average over the past 30 years. But productivity growth hasn’t been anything like that high for two decades. On average it has been 1.2%, which is the much lower number Chalmers has plugged in, cutting forecast economic growth by 1.75% over the next decade.</p>
<p>The previous budget expected the National Disability Insurance Scheme to cost $46 billion per year by 2025-26. This budget expects it to cost $51.7 billion in the light of new actuarial projections, pointing to spending increases of 14% per year.</p>
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Read more:
<a href="https://theconversation.com/albanese-governments-first-budget-delivers-election-promises-but-forecasts-soaring-power-prices-192844">Albanese government's first budget delivers election promises but forecasts soaring power prices</a>
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<p>The previous budget expected net interest payments to amount to 0.8% of gross domestic product by 2032-33. This budget factors in almost double the cost – 1.5% of GDP – as a result of much higher interest rates.</p>
<p>By 2025-26 it expects interest payments to cost $26.5 billion, which is more than it expects to spend that year on family payments, pharmaceutical benefits, or schools. It expects net debt of 31.9% of GDP by June 2033, well up on the 26.9% expected in March.</p>
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<p>As is a Treasury tradition, the revenue forecasts are conservative. Whereas the March budget assumed iron ore, coal and gas prices would fall from exceptionally high levels to long-term averages by September 2022, the October budget assumes the same fall, but for March 2023.</p>
<p>In truth it’s hard to tell what will happen six months into the future, let alone the four years for which the budget makes forecasts and the ten years for which it makes projections, as what’s happened since March makes clear.</p>
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Read more:
<a href="https://theconversation.com/the-beginning-of-something-new-how-the-2022-23-budget-does-things-differently-192850">‘The beginning of something new’: how the 2022-23 budget does things differently</a>
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<p>But taken together, Chalmers’ more cautious assumptions and the enthusiasm with which Gallagher has embraced cost-cutting paint a weak picture of the year. Economic growth is forecast to be 3.25% this financial year, down from 3.5% forecast in March. </p>
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<p>Next financial year it is expected to be 1.5% down from 2.5% forecast in March (albeit while countries including the United Kingdom and the United States grapple with recessions).</p>
<p>Unemployment is expected to be much higher than forecast in March – 4.5% instead of the 3.75% by mid 2024, which would mean an extra 100,000 or so people out of work.</p>
<p>It’s a price Chalmers and Gallagher seem prepared to pay if it means getting on top of inflation, although it wasn’t one they were prepared to draw attention to. </p>
<p>The budget papers say employment will climb in each of the next four years, and doubtless it will, because the population will climb, but isn’t a particularly strong claim to make.</p>
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<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Frightened by the prospect of an inflation rate approaching 8%, Chalmers has pumped very little into the economy, funding most of their extra spending by cutting Coalition programs.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1928412022-10-25T08:36:12Z2022-10-25T08:36:12ZJim Chalmers’ ‘restraint’ budget the first stage of a marathon for the treasurer<figure><img src="https://images.theconversation.com/files/491607/original/file-20221025-21-h7cudu.jpg?ixlib=rb-1.1.0&rect=0%2C840%2C6562%2C3596&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Mick Tsikas/AAP</span></span></figcaption></figure><p>Jim Chalmers’ inaugural budget plants its feet as solidly as possible in the shifting sands of difficult and unpredictable international and local conditions.</p>
<p>Chalmers promised the budget would be “workmanlike”, not “flashy”, and he’s kept his word. Almost all of it had been pre-issued by the government, including measures and numbers.</p>
<p>This can be seen as an interim budget, a new government taking stock and getting some early action under way.</p>
<p>At one level, the budget does the easy things.</p>
<p>It hoes into some relatively soft targets left by the Coalition, which distributed giveaways galore as it became desperate before the election. And it implements a raft of promises on which Labor campaigned.</p>
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<p>But framing any budget in such uncertain times involves tricky trade offs and careful judgement. So the opposition’s “line” before Tuesday – that this is just in effect a mid-year budget update – greatly understates the task.</p>
<p>The government has been sensibly cautious. Keeping spending tight was vital. Despite the hard times and the pressure to give people help, any splurging would have been inflationary and at cross purposes with the Reserve Bank’s efforts to cool the economy.</p>
<p>Interest rates are set to go up again before Christmas anyway – so the worst thing would have been a fiscal policy that forced the bank to push them up even further.</p>
<p>The emphasis on delivering election commitments in this first budget is important because it builds voter trust – and thus political capital – early in the government’s term.</p>
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<p>On this front, Prime Minister Anthony Albanese was wise to pull back from Chalmers’ inclination to refashion the Stage 3 tax cuts. That would have transformed the budget story from “promises kept” to “promise broken”, with the potential to sour Labor’s compact with the electorate.</p>
<p>“Restraint is the name of the game in this budget,” Chalmers said at his news conference in the media “lock up”. While Tuesday’s effort passes the “restraint” test for now, it is obvious that there are tough decisions ahead.</p>
<p>The numbers show the deficit larger, compared to this financial year, in the second, third and fourth year of the forward estimates. Outlays in areas such as the National Disability Insurance Scheme (costed at nearly $52 billion in 2025-26 and potentially about $100 billion a year by 2032-33) will have to be tackled, and that will be much harder politically than cancelling a Coalition dam or some car parks.</p>
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<p>The economists will like the budget, but what about the ordinary voters?</p>
<p>Leaving aside those in the pockets hit by the cuts, they are unlikely to be hostile. But nor will they see much in it for them.</p>
<p>And they will be dismayed by the horrendous forecasts for electricity and gas prices, and how far away is the hope of real wage rises. But more broadly, they will be already across the inflation story from their daily lives.</p>
<p>The promises on cheaper child care, lower costs for medicines, and more affordable housing are branded as part of “responsible cost of living relief”.</p>
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Read more:
<a href="https://theconversation.com/jim-chalmers-2022-23-budget-mantra-whatever-you-do-dont-fuel-inflation-192846">Jim Chalmers’ 2022-23 budget mantra: whatever you do, don’t fuel inflation</a>
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<p>But it’s a misnomer. Only a minority of people at any one time will benefit from the child care changes. Housing will remain unaffordable for many people.</p>
<p>As cost-of-living relief, the budget measures pale when put beside the coming massive power costs and the interest rate rises of the last few months and those ahead.</p>
<p>This is not to say the budget should have given more direct cost-of-living assistance. It’s just to note there is some hyped “branding” by a government that puts a lot of store on how it labels things.</p>
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<p>Chalmers emphasises this is the first of a suite of budgets, which will be preceded by “conversations”. It’s a fair bet the later ones will generate stronger headlines.</p>
<p>The future cuts will be more controversial. And at some stage the government will visit the tax issue, although when and in what form is unknown. “I think tax needs to be part of the conversation going forward,” Chalmers told the media.</p>
<p>It’s been a hard few months for Chalmers. But in reality, he’s been in the easy stage of what will be a marathon. </p>
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Read more:
<a href="https://theconversation.com/the-beginning-of-something-new-how-the-2022-23-budget-does-things-differently-192850">‘The beginning of something new’: how the 2022-23 budget does things differently</a>
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<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Chalmers promised the budget would be “workmanlike”, not “flashy”, and he’s kept his word. Almost all of it had been pre-issued by the government, including measures and numbers.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1928502022-10-25T08:34:16Z2022-10-25T08:34:16Z‘The beginning of something new’: how the 2022-23 budget does things differently<p>Treasurer Jim Chalmers told reporters on Tuesday his first budget was “the beginning of something new and responsible”.</p>
<p>The October 2022-23 budget under Labor is certainly a different beast from the one handed down by the Coalition just before the federal election. It is not just the numbers that have changed, the approach is different as well.</p>
<p>This budget recasts the fiscal strategy, emphasises wellbeing and highlights climate change.</p>
<h2>A revamped fiscal strategy</h2>
<p>Fiscal strategy is about the government’s approach to spending and tax. All federal governments need to spell out their fiscal strategy under the Charter of Budget Honesty.</p>
<p>The Coalition government had a long stated goal of keeping tax revenue below 23.9% of GDP. There was no science behind this number. It was just the ratio during the Howard government.</p>
<p>A key difference under the Albanese government is there is now no arbitrary number. But it makes a commitment to direct the “majority” of revenue improvements to budget repair.</p>
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<p>Less than half the revenue improvements in the last seven budget updates were directed to improving the budget balance. This year it will be more than 90%.</p>
<p>There is also a commitment to “limiting” growth in spending until gross debt as a share of GDP is on a downward trend. The debt to GDP ratio is projected to increase until at least 2032-33. But this commitment only holds “while growth prospects are sound and unemployment is low”. It therefore does not rule out fiscal stimulus in a crisis.</p>
<p>The strategy refers (repeatedly) to the budget needing to be “sustainable’’.</p>
<h2>A focus on wellbeing</h2>
<p>The main budget paper now has a new chapter, called "measuring what matters”.</p>
<p>It has long been acknowledged that GDP is not, and was never designed to be, a measure of “wellbeing”.</p>
<p>Yet until now, GDP has largely by default been regarded as the benchmark of national success in the budget papers.</p>
<p>This year, the budget also includes “indicators that measure broader quality of life factors’” and compares Australia to its peers in the OECD.</p>
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<p>The budget papers present the indicators as a dashboard with green coding for where Australia outperforms.</p>
<p>Areas where Australia is doing better than the OECD average include income and wealth, employment, education and life expectancy. But in some areas (shown in red), we are doing worse than the OECD and deteriorating, such as the number of threatened species and the extent of household debt.</p>
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Read more:
<a href="https://theconversation.com/jim-chalmers-2022-23-budget-mantra-whatever-you-do-dont-fuel-inflation-192846">Jim Chalmers’ 2022-23 budget mantra: whatever you do, don’t fuel inflation</a>
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<p>There is no attempt to weight the indicators to form a single overall index. </p>
<p>But with statements like “Australia is at or better than the OECD average on 21 of the 32 headline indicators,” this represents a market difference from past budgets and a change in the way we view what matters in policymaking.</p>
<h2>Climate change</h2>
<p>Climate change is mentioned on some 16 pages of the main budget document. This includes the “measuring what matters” chapter, with the acknowledgment Australia has the highest per capita greenhouse gas emissions in the OECD.</p>
<p>There is also a new section on the “fiscal impacts of climate change”. This notes how climate change adversely affects economic activity, by eroding the tax base. Climate change also leads to higher spending on things like disaster relief.</p>
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Read more:
<a href="https://theconversation.com/jim-chalmers-restraint-budget-the-first-stage-of-a-marathon-for-the-treasurer-192841">Jim Chalmers' 'restraint' budget the first stage of a marathon for the treasurer</a>
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<p>The section also notes how moving away from fossil fuels will boost tax collections from some industries. For example, the shift to electric cars will stimulate demand for the lithium used in their batteries.</p>
<p>Total climate-related spending is $25 billion over 2022-23 to 2029-30.</p>
<p>This will not be the last mention. A new annual climate change statement will be made to parliament. The implications of climate change will also be analysed in next year’s Intergenerational Report. To assist in their preparation, Treasury’s climate modelling capacity will be rebuilt.</p>
<h2>More to come</h2>
<p>The 2022-23 budget gives us new and useful information and analysis about our economy and policy landscape. It also promises more to come.</p>
<p>There will be a new wellbeing statement in 2023 and unusually, the budget papers invite readers to submit their views on this issue.)</p>
<p>There will also be a white paper on employment in the second half of 2023. Public servants and economists are going to be very busy.</p>
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<p class="fine-print"><em><span>John Hawkins has been an economic forecaster in the Reserve Bank and the Australian Treasury.</span></em></p>It’s not just the numbers that have changed in Jim Chalmers’ first budget. There is an emphasis on climate change and wellbeing, too.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1925762022-10-23T19:02:37Z2022-10-23T19:02:37ZImagine if each of us could direct where our taxes were spent. Meet TaxTrack<figure><img src="https://images.theconversation.com/files/490812/original/file-20221020-11-hyv7ec.png?ixlib=rb-1.1.0&rect=0%2C0%2C3486%2C1617&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Ahead of this week’s budget, Treasurer Jim Chalmers says he wants Australians to prepare for a <a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/transcripts/press-conference-blue-room-canberra">serious conversation</a> about how to pay for the services we need. </p>
<p>We’ve developed a proposal to make that conversation more real.</p>
<p>Australians pay a lot of tax (although <a href="https://www.oecd.org/coronavirus/en/data-insights/tax-to-gdp-ratios">less</a> than in some other countries) and we pay it in a lot of ways: through income tax, the goods and services tax, excise duties, stamp duties, council rates, and capital gains tax. </p>
<p>Most of us accept tax, if grudgingly. But many <a href="https://poll.lowyinstitute.org/charts/budget-priorities/">aren’t happy</a> with how it is spent.</p>
<p>Enter <a href="https://www.researchgate.net/publication/364342475_TaxTrack_Introducing_a_Democratic_Innovation_for_Taxation_Introduction_Born_in_The_Great_Disconnect">TaxTrack</a> – our hypothetical proposal for democratising taxation, details of which are to be published in the <a href="https://www.aspg.org.au/a-p-r-journals-2/">Australasian Parliamentary Review</a>.</p>
<p>Our idea is that Australians who want a greater say in where their taxes go could be given a TaxTrack number, which would trace those dollars and direct them only to places they wanted them to go.</p>
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<a href="https://images.theconversation.com/files/490814/original/file-20221020-23-aw3wct.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/490814/original/file-20221020-23-aw3wct.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/490814/original/file-20221020-23-aw3wct.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=969&fit=crop&dpr=1 600w, https://images.theconversation.com/files/490814/original/file-20221020-23-aw3wct.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=969&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/490814/original/file-20221020-23-aw3wct.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=969&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/490814/original/file-20221020-23-aw3wct.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1218&fit=crop&dpr=1 754w, https://images.theconversation.com/files/490814/original/file-20221020-23-aw3wct.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1218&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/490814/original/file-20221020-23-aw3wct.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1218&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">An app could display the invoices a user’s taxes had paid.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<p>If they wanted, they could view the invoices their contributions had helped pay, and they could specify which invoices their contributions should not pay – perhaps by prohibiting the spending of their money on things such as military ammunition, or specifying that a certain proportion was directed to healthcare.</p>
<p>Governments would have to work with those instructions, cutting spending in areas that lacked support and boosting it in areas for which there was overwhelming support.</p>
<p>It would give taxpayers a lot of power, and a good deal more engagement.</p>
<p>The idea borrows from previous experiments with “participatory budgeting”, including one in the Brazilian city of <a href="https://journals.sagepub.com/doi/abs/10.1177/0486613411418055">Porto Alegre</a> in the 1980s. </p>
<p>But whereas these experiments gathered citizens together to discuss the outputs of budgets (as Chalmers is proposing) ours would empower citizens at the <em>input</em> stage, using technology that has only recently become available.</p>
<h2>What are the drawbacks?</h2>
<p>We foresee problems. One is that necessary but unpopular activities might not be funded. For instance, administration, and tax collection itself, tend to be unpopular and could face a squeeze.</p>
<p>Taxpayers might also decide to look after themselves. The young might strip pensions from the old. The old might cut funding that goes to the young.</p>
<p><a href="https://www.participatorybudgeting.org/what-is-pb/">Public forums</a> and <a href="https://www.futuregenerations.be/en/deliberative-democracy-citizens-panels">deliberative citizens’ panels</a> would likely be needed to work through the contradictions.</p>
<p>But the forums, and the agency the system would give to citizens, would connect them more strongly to government and help combat the <a href="https://www.cato.org/commentary/disenchantment-rife-could-third-party-be-step-forward">political disenchantment</a> seen in the United States and elsewhere.</p>
<p>At this stage it’s only an idea, albeit one that has become technologically feasible. It mightn’t yet be politically feasible. But things are moving in that direction.</p>
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Read more:
<a href="https://theconversation.com/economic-democracy-how-handing-power-back-will-fix-our-broken-system-126122">Economic democracy: how handing power back will fix our broken system</a>
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<p>Given Chalmers’ exhortation to the Australian people to have a “serious conversation” about how to fund public services, our proposal (or something like it) would offer people a practical way to do it.</p>
<p><a href="https://www.economist.com/special-report/2014/02/20/plucking-the-geese">Jean-Baptiste Colbert</a>, finance minister to Louis XIV, famously declared the art of taxation “consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing”.</p>
<p>It might be time for the goose to decide how its feathers are used.</p>
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Read more:
<a href="https://theconversation.com/australia-needs-an-honest-conversation-about-tax-and-budgets-and-jim-chalmers-is-ready-to-talk-192603">Australia needs an honest conversation about tax and budgets – and Jim Chalmers is ready to talk</a>
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<img src="https://counter.theconversation.com/content/192576/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jean-Paul Gagnon works with the University of Canberra and pays tax.</span></em></p><p class="fine-print"><em><span>Angela Tan-Kantor is an academic at the University of Canberra. She is affiliated with the Institute of Public Affairs, Institute of Public Accountants and the Financial Services Institute of Australasia. </span></em></p><p class="fine-print"><em><span>Bomikazi Zeka pays tax.</span></em></p><p class="fine-print"><em><span>John Hawkins pays tax and regards it as the price of civilisation.</span></em></p>What if we could direct where our taxes went and see the invoices paid. It’s a serious suggestion.Jean-Paul Gagnon, Senior lecturer in democracy studies, University of CanberraAngela Tan-Kantor, Assistant Professor of Financial Accounting, University of CanberraBomikazi Zeka, Assistant Professor in Finance and Financial Planning, University of CanberraJohn Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1930892022-10-23T11:31:02Z2022-10-23T11:31:02ZAustralia’s growth downgraded and inflation drives massive rise in cost of pensions and payments in budget<p>Tuesday’s budget will point to a slowing Australian economy, with growth forecasts cut, and contain more than $21 billion of savings and decisions to redirect spending. </p>
<p>Delivered against a background of rising inflation, increasing interest rates and huge global uncertainties, Treasurer Jim Chalmers’ first budget will also contain $32.8 billion in extra funding over four years for pensions and payments compared to the April Pre-election Economic and Fiscal Outlook (PEFO) forecasts. </p>
<p>The budget pays for the largest indexation increase to payments in more than 30 years for allowances and the largest in 12 years for pensions.</p>
<p>High inflation and changing economic parameters account for this huge rise in social security payments. </p>
<p>Spending on social security payments in 2022-23 is set to be $120.1 billion. This is an increase of $3.1 billion since PEFO.</p>
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Read more:
<a href="https://theconversation.com/floods-drive-up-fruit-and-veg-prices-while-energy-costs-will-prolong-high-inflation-193014">Floods drive up fruit and veg prices, while energy costs will prolong high inflation</a>
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<p>The breakdown of social security payments in 2022-23, with increases compared to PEFO forecasts, is: </p>
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<li><p>Job Seeker payments: $14.3 billion for 2022-23 – an increase of $1.5 billion and $10.6 billion over four years</p></li>
<li><p>Support for seniors/age pension: $55.3 billion for 2022-23, an increase of $1.1 billion in 2022-23 and $11.8 billion over four years</p></li>
<li><p>Family assistance payments: $20.5 billion for 2022-23, an increase of $4.4 billion over four years</p></li>
<li><p>Financial Support for Carers: $10.6 billion for 2022-23, an increase of $0.8 billion in 2022-23 and $2.5 billion over four years</p></li>
<li><p>Financial Support for people with Disability: $19.5 billion for 2022-23, an increase of $0.4 billion in 2022-23 and $3.5 billion over four years.</p></li>
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<p>The budget will show the forecast for Australia’s real GDP growth has been downgraded to 3.25% for 2022-23, which is a quarter of a percentage point lower than the forecast in PEFO. </p>
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Read more:
<a href="https://theconversation.com/grattan-on-friday-politics-of-future-budgets-likely-to-get-harder-for-albanese-government-192948">Grattan on Friday: Politics of future budgets likely to get harder for Albanese government</a>
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<p>Growth for 2023-24 is forecast to be a low 1.5%, one percentage point lower than PEFO. </p>
<p>The slowdown is expected to be primarily driven by weaker household consumption growth, as a result of increasing interest rates and cost of living pressures. </p>
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<p>Chalmers doesn’t expect the Australian economy to go into recession, despite the slides in key economies overseas. </p>
<p>Labor campaigned strongly in the election on lifting real wages, but circumstances have pushed that prospect into the distance. </p>
<p>Chalmers told the ABC: “Real wages were falling behind before the election and they’ve been falling since the election. That’s because inflation is higher for longer as a consequence of the war in Ukraine, natural disasters and issues in our own supply chains here at home, and also a consequence of a decade of wage stagnation”.</p>
<p>He said on “current treasury forecasts, inflation will persist for longer than we’d like, and wages growth, which is beginning to happen in our economy, will cross over with inflation some time we think the year after next”. </p>
<p>Chalmers said the budget would be “family-friendly”, recognising “that our pressures on the economy come from around the world, but they’re felt around the kitchen table”.</p>
<p>It would be responsible, sensible and suited to the times “because when you’ve got all of this uncertainty around the world, the best possible response is a responsible budget at home”. </p>
<p>On the savings side, $6.5 billion has been found from what the government describes as “re-profiling of infrastructure projects to better align the investment with construction market conditions”. </p>
<p>Some $3.6 billion is saved from reducing spending on external labour, advertising, travel and legal expenses. </p>
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Read more:
<a href="https://theconversation.com/lidia-thorpe-sacked-as-a-greens-deputy-leader-after-failing-to-disclose-relationship-with-bikie-figure-192947">Lidia Thorpe sacked as a Greens deputy leader after failing to disclose relationship with bikie figure</a>
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<p>More than $2 billion has been cut from a range of grants programs.</p>
<p>Savings have been identified across government agencies. But the government says this is just the “first phase” of its spending audit, with more savings to be found in future budgets. </p>
<p>With regional programs set to be hit, shadow treasurer Angus Taylor told the ABC he’d just spent eight days cycling through regional NSW and “a lot of those regional infrastructure investments are paying back in spades right now. We’re seeing incredible resilience and robustness.” </p>
<p>Apart from the budget, the resumption of parliament this week will see the introduction of the government’s industrial relations legislation for multi-employer bargaining, which is running into business opposition. </p>
<p>In a statement on Friday the Australian Chamber of Commerce and Industry, the Business Council of Australia and the Australian Industry Group said the planned changes “raise the risk of higher unemployment, increased strike action and damage to our economic security”. </p>
<p>The groups said the government should “slow down and consult more widely and more meaningfully”.</p><img src="https://counter.theconversation.com/content/193089/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Delivered against a background of rising inflation, increasing interest rates and huge global uncertainties, Labor’s first budget will also contain $33 billion in extra funding for pensions and payments.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1926592022-10-23T08:35:57Z2022-10-23T08:35:57ZNigeria’s 2023 budget is a plan of despair and won’t change the tempo of the economy<figure><img src="https://images.theconversation.com/files/490632/original/file-20221019-17-8yizmx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Nigeria's 2023 budget may not address food inflation. </span> <span class="attribution"><span class="source">Gettyimages/istock</span></span></figcaption></figure><p>Nigeria’s <a href="https://www.budgetoffice.gov.ng/index.php/resources/internal-resources/call-circular/2023">2023 budget</a>, recently presented by President Muhammadu Buhari to the National Assembly, has generated a furore. </p>
<p>There are concerns about the impact on the country’s <a href="https://www.reuters.com/world/africa/nigerias-public-debt-rises-103-billion-second-quarter-2022-09-20/">rising deficits and debt</a>, as well as its failure to address some of the structural deficiencies behind declining revenues and <a href="https://thenationonlineng.net/rising-deficit-declining-revenue-raise-concerns-over-n20-51tr-2023-budget/">rising inflation</a>.</p>
<p>The 2023 budget <a href="https://businessday.ng/opinion/article/full-text-of-president-muhammadu-buharis-2023-budget-speech/">expenditure</a> of 20.51 trillion naira (US$43.7 billion) is the highest ever. More than half of this is money the government doesn’t have and has to be financed with new debt. This will mean that the country exceeds the 3% of GDP threshold stipulated by the <a href="https://internationalbudget.org/wp-content/uploads/Nigeria-FiscalResponsibilityAct2007-English.pdf">Fiscal Responsibility Act of 2007</a> – a pointer to the worsening of the country’s fiscal health.</p>
<p>More than 60% of the 2023 budget will finance debt repayments (N6.31 trillion), personnel costs (N4.99 trillion) and overheads (N1.11 trillion). This leaves very little for spending to revitalise the economy and raise its growth potential.</p>
<p>Rather than being a budget of hope, Buhari’s proposal is a budget of despair. It won’t significantly change the tempo of the economy. Nor will it reduce the country’s high unemployment, poverty and inflation rates. </p>
<p>In fact it could worsen Nigeria’s cycle of deficits and debts, without the possibility of fostering structural transformation, diversifying the economy, promoting sustainable economic growth, and reducing unemployment and poverty. </p>
<h2>Endless cycle of deficits</h2>
<p>The budget is consistent with previous Buhari administration budgets. </p>
<p>Most importantly, it doesn’t address structural deficiencies in the Nigerian economy. These include the lack of diversification and non-oil sources of revenue. These have been responsible for the country’s cycle of high <a href="https://www.reuters.com/world/africa/nigerias-budget-deficit-will-widen-478-fuel-subsidy-end-2022-10-07/">budget deficits</a> and <a href="https://www.vanguardngr.com/2022/09/why-nigeria-is-in-debt-dmo-dg/">government debts</a>.</p>
<p>The 2023 <a href="https://thenationonlineng.net/roads-rail-varsities-priority-in-n20-5tr-2023-budget/">budget prioritises</a> investment in road and rail projects, power projects, clean water, construction of irrigation infrastructure and dams across the country, and critical health projects.</p>
<p>These are all well and good, but it’s unclear how they will reduce the <a href="https://theconversation.com/nigerias-economy-four-priorities-the-next-president-must-deliver-on-189022">high unemployment</a> and poverty rates in the country. These projects are not widespread and labour-intensive enough to absorb millions of unemployed Nigerians. </p>
<p>It is also unclear how many of the projects will be completed, given the propensity for successive governments in Nigeria to <a href="https://www.vanguardngr.com/2021/12/nigerias-56000-abandoned-projects/">abandon projects</a>. </p>
<p>The biggest problem is that the budget fails to address the issue of diversifying the economy. This is vividly reflected in its title: <a href="https://www.thecable.ng/n9-7trn-projected-revenue-n10-7trn-deficit-highlights-of-2023-budget-proposal">Fiscal Sustainability and Transition</a>. </p>
<p>One cannot have fiscal sustainability without structural transformation. This involves resources being reallocated from low-productivity to high-productivity sectors of the economy. The budget made only a tepid reference to the manufacturing sector. Yet this could deliver a number of benefits.</p>
<p>The first is jobs. Manufacturing uses more labour per unit of output and could absorb the <a href="https://guardian.ng/opinion/unemployment-and-a-nations-40-per-cent-of-hopelessness/">high number</a> of unemployed and underemployed Nigerians. Nigeria’s informal sector contributes about <a href="https://punchng.com/80-4-of-nigerian-employment-in-informal-sector-says-wbank/">80%</a> of the country’s employment, making it difficult to collect taxes. An increase in the number of Nigerians in formal sector jobs would raise more income taxes and reduce the need for borrowing. Manufacturing enterprises also tend to be <a href="https://businessday.ng/companies/article/how-manufacturing-industry-drove-company-income-tax-in-q1/">more stable</a>.</p>
<h2>Gaps</h2>
<p>Nigeria is having to borrow because of two key weaknesses – neither of which are addressed in the budget.</p>
<p>The first is the country’s lingering “dual-gap” economic problem. This refers to a situation in which domestic savings aren’t adequate to fund a country’s desired level of capital investment – the saving-investment gap. </p>
<p>In addition, the country doesn’t generate enough foreign exchange earnings to pay for its imports – the foreign exchange gap. It’s difficult to estimate the magnitude of the foreign exchange gap in Nigeria. But it’s manifested by the fact that foreign airlines in the country have been unable to repatriate about <a href="https://www.icirnigeria.org/trapped-funds-why-airlines-cant-repatriate-money-out-of-nigeria/">$450 million</a> in ticket sales because of acute shortages of foreign exchange. </p>
<p>Nigeria isn’t generating enough foreign exchange earnings to meet the economy’s requirements. This has led to a parallel market in foreign exchange, with most businesses and individuals turning to the parallel market to source major foreign currencies such as the US dollar.</p>
<p>The 2023 budget is based on an exchange of rate of 435.57 naira to US$1, compared to over <a href="https://www.thecable.ng/naira-hits-n742-at-parallel-market-as-fx-scarcity-bites-harder">700 naira</a> at the parallel market. Buhari made no mention of government intention to close this <a href="https://www.premiumtimesng.com/news/headlines/556088-nigerias-forex-crisis-deepens-as-gap-between-nairas-official-black-rates-widest-in-six-years.html">huge gap</a> between the official exchange rate and the parallel market rate. </p>
<p>The only sustainable way to close this gap is to raise the capacity of the economy to generate foreign exchange earnings.</p>
<p>The gap has serious implications for government expenditure outcomes. Many of the ministries, departments and agencies of government buy goods and services from companies that source their foreign exchange requirements from the parallel market. </p>
<p>This automatically makes expenditure estimates in the 2023 budget unrealistic, as the suppliers of goods and services will require a revision to their contracts to cover the higher costs of sourcing foreign exchange. This would then require supplemental budgets and additional borrowings, which in turn, make expenditure projections unreliable. </p>
<h2>Lingering fears</h2>
<p>The first and second quarters of 2023 will be dominated by <a href="https://inecnigeria.org/wp-content/uploads/2022/09/TIMETABLE-FOR-2023-GENERAL-ELECTION.pdf">elections</a> and political transitions. This may have the effect of disrupting economic activities and fuelling uncertainties, especially among domestic and foreign investors. </p>
<p>The economy may therefore fall short of the 3.5% growth rate assumed in the budget parameters, which would subsequently result in lower revenues and additional borrowings.</p>
<p>Nigeria’s overall <a href="https://tradingeconomics.com/nigeria/government-debt-to-gdp">debt to GDP ratio</a> of about 37% is <a href="https://theconversation.com/nigerias-debt-is-sustainable-but-dangers-loom-on-the-horizon-166372">sustainable</a>. However, the new round of budgeted borrowing sends the wrong signal to domestic and foreign investors. </p>
<p>Deficits and debts imply that taxes will be raised in the future to pay for debts, making investments less profitable. It may also prompt nervous investors to move their capital to more fiscally stable countries.</p>
<p>There are also fears that unrestrained borrowing could tilt the country’s debt portfolio into the realm of unsustainability, which may then lead to defaults in debt repayments and a steep decline in new loans. Government obligations to contractors and other investors would be jeopardised. </p>
<p>The lip service paid by the 2023 budget to structural transformation and sustained economic development will dampen investors’ optimism about the Nigerian economy. The lack of clarity about the future direction of the economy under a new administration, as well as the lingering security challenges in the country, will make matters even worse.</p><img src="https://counter.theconversation.com/content/192659/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Onyeiwu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Nigeria’s 2023 budget could worsen the country’s cycle of deficits and debts.Stephen Onyeiwu, Professor of Economics & Business, Allegheny CollegeLicensed as Creative Commons – attribution, no derivatives.