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ASHLYNNE:

From Schwartz Media and 7am, I’m Ashlynne McGhee. This is The Cost: Inside the living crisis.

Last night treasurer Jim Chalmers delivered a budget that may decide the fate of the Albanese government. There’s billions of dollars in new spending with another round of power bill rebates, no annual price hike on PBS medicines and a boost to the rent assistance payment. But as so many Australians struggle to put food on the table, or keep a roof over their head – has the government spent enough? Or - has it spent too much - and are more rate hikes on the cards…

Today, chief political correspondent for The Saturday Paper Karen Barlow, on what support the government delivered, and whether there is devil in the detail.

It’s Wednesday, May 15.

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ASHLYNNE:

Karen, first of all, welcome to the show, our new chief political correspondent. And we're talking on budget night.

KAREN:

Hello. Great to be here.

Audio Excerpt – Jim Chalmers:

“Mr Speaker, this is a budget for the here and now, and it's a budget for the decades to come.”

ASHLYNNE:

So I want to begin with what Jim Chalmers had to deliver in this budget. Like, what choices were the Albanese government grappling with, and how significant was it for the treasurer to get it right?

KAREN:

Oh, hugely important. We're in an election year without a date. Households are really crying out for cost of living relief, and the Treasurer's main job is to not make it worse.

Audio Excerpt – Jim Chalmers:

“This uncertainty combines with cost of living pressures and higher interest rates to slow our economy, with growth forecast to be just 1.75% this financial year and 2% next…”

KAREN:

We have Jim Chalmers presenting also relief and reform and a lot of talk about promise and potential of a more prosperous future. But this budget, Jim Chalmers' third, is an economic and heavily political document.

Audio Excerpt – Jim Chalmers:

“Speaker, the number one priority of this government and this budget is helping Australians with the cost of living. Responsible relief that eases pressure on people and directly reduces inflation.”

KAREN:

For Jim Chalmers, this is what he's been working on all year since the last budget. It's been taking his every waking hour. He's been spending a lot of time with the finance minister, Katy Gallagher. But, this is also while, you know, there's people screaming out for more cost of living relief. But at the same time, urgings that the inflation problem is not made worse by extra spending.

Audio Excerpt – Jim Chalmers:

“The story of Australia is more than a tale of the challenges that we have endured and in our future, we need to strive for something more than muddling through or making do.”

ASHLYNNE:

So the biggest issue for many Australians in this election will probably be the soaring cost of living. So how big did the government go on support from people?

KAREN:

Look, it was a fair bit but yeah, as I said before, it's tempered by not making the whole situation worse. But, what we have here, $7.8 billion in new spending. We have the amended stage three tax cuts. That's worth $20 billion a year over ten years. Remember, this is for all taxpayers, and they kick in shortly on July 1st, and there's a benefit of about $36 a week. But what's new is, $3.5 billion in across the board energy bill relief over three years…

Audio Excerpt – Jim Chalmers:

“Just as every Australian taxpayer will get a tax cut, every Australian household will get energy price relief. From July 1, Australians will receive an energy rebate of $300 and 1 million small businesses will get a little bit more.”

KAREN:

…there’s some freezing of the maximum cost of medicines…

Audio Excerpt – Jim Chalmers:

“And we are freezing the maximum cost of PBS prescriptions for everyone. This year and next year, no one will pay more than $31.60.”

KAREN:

…there's also Commonwealth rent assistance that's being increased, to further help young people and renters.

Audio Excerpt – Jim Chalmers:

“It's the first back to back increase to Commonwealth rent assistance in more than 30 years, and more much needed help for young people and for renters of all ages doing it tough.”

KAREN:

The budget papers insist that the energy bill relief and rent assistance will directly reduce headline inflation by 0.5 of a percentage point, in the next financial year. Every percentage point counts, as we know. But look, if it's possible, there's also another centrepiece of the budget in the reform of aspiration, I guess: the Future Made in Australia package.

ASHLYNNE:

So yeah, tell me more about that Future Made in Australia plan, because essentially it was a bit of a slogan at the start and there wasn't much flesh on the bones, but have we now got a bit more detail around that? Like, is it a sizeable policy that's going to have some serious impact on the country?

Audio Excerpt – Jim Chalmers:

“Our 22.7 billion dollar Future Made in Australia package will help make us an indispensable part of the global net-zero economy.”

KAREN:

It’s seen as a bit of a slogan, but look, the treasurer says this is the big reform piece in the budget. It's been revealed as a ten year, $22.7 billion package, but it's largely made up of tax incentives to attract and deploy, they say, investment and to get the nation off fossil fuels along the way.

Audio Excerpt – Jim Chalmers:

“We know that the global energy transformation presents a golden opportunity for Australia. The world is changing and the pace of that change is accelerating, and our approach to growth and investment needs to change as well.”

KAREN:

What we have here are production incentives. There's a $7 billion critical minerals production tax incentive, and there's also a $6.7 billion hydrogen production tax incentive. And that's going to provide a $2 incentive per kilo of renewable hydrogen.

Audio Excerpt – Jim Chalmers:

“If we hang back, the chance for a new generation of jobs and prosperity will pass us by and our people will be poorer and our economy will be more vulnerable as a consequence.”

KAREN:

And a real focus on batteries, renewable hydrogen, quantum computing, low carbon liquid fuels, so a lot to see, but there's also concern about a risk to taxpayers money. And we're talking about a lot here. Chalmers has stressed that there will be protections built into the system to stop any abuse of the billions.

ASHLYNNE:

So Karen, it feels like a lot of the detail in this budget has really already been spoon fed to us over the past week or so. And one of the headlines that the government's been really keen to talk about is its surplus. So in this economy, how did we end up with a surplus and why is it such an important thing for the government?

KAREN:

Well, there's an incredible political imperative to this, it's the mantle of ‘better economic manager’. It's a key indicator of basic performance, I guess, for a government. It's in most opinion polls and it's something that we know is a vote winner.

Audio Excerpt – Jim Chalmers:

“Last year, our responsible economic management delivered the first surplus in 15 years. We now expect another surplus of $9.3 billion this year. These would be the first back to back surpluses in almost two decades.”

KAREN:

That’s expected and that comes after $22.1 billion the previous year.

Chalmers is warning, though, that there are pressures on the government that are only going to get worse. And while he and Katie Gallagher are working to reign it in, there's a sea of red about to pour in, and the coming deficits are much larger than previously forecast.

ASHLYNNE:

After the break, the hidden details that hint at what’s coming in the next election campaign.

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ASHLYNNE:

Karen, so for a lot of yesterday, you were in the lockup poring over the budget papers. Tell us about some of the more interesting things you uncovered in there.

KAREN:

Yeah okay, so even if the 300 energy bill credits and the increase to Commonwealth rent assistance is not enough of a big election sign, there's a promise of more to come, but a promise. This column on a table in the papers, which the government does not want to focus on, is a place where we find what's called the ‘decisions taken but not yet announced and not for publication’. A pretty weighty, little set of words there. But it's about, a figure that comes in at $1.12 billion, so this is spending closer to an election when voters' minds are starting to firm. But it is a very interesting number because we don't know what it's for. We have to have a guess. It is not for us to know just yet.

ASHLYNNE:

In the budget papers, even though we know so much detail before the budget is actually handed down now, there still can be some surprises. Did you find anything that was a surprise?

KAREN:

For me, I think the surprise can be found in services for veterans. $3 billion has been found there, and part of that is bolstering staffing at the Veterans Affairs Department.

Audio Excerpt – Jim Chalmers:

“And we’ve achieved all of this despite much smaller revenue upgrades in the budget, and still providing an extra $3 billion dollars to ensure Australians, including our veterans, receive better essential services.”

KAREN:

This comes after the Veterans Royal Commission and after the government has got through a claims backlog for veterans earlier this year. That's quite a bit of money that's been found. Related, the Australian War Memorial had money, more money, found for it. Another eight million dollars after nearly all, just over half $1 billion has been spent upgrading, the Canberra based site. And I did find that the National Mental Health Commission is being defunded and the money is going back into the health budget, and they're going to delay the decisions on what to do with that particular area. But that's part of it across the board, health spend and reprioritisation. So that was particularly interesting.

ASHLYNNE:

So for people concerned about the cost of living, what do we know about whether this kind of spending we're seeing in the budget is going to make that better, or whether this spending could actually make the situation worse, it could lead to more interest rate rises.

KAREN:

Well, so the budget papers tell us that the spending on cost of living relief is de-inflationary and will amend the situation by 0.5 of a percentage point.

Audio Excerpt – Jim Chalmers:

“Annual inflation has more than halved from its peak in 2022, and it's now lower than anticipated in the mid year update. But we know that people are still under the pump. That's why we designed our cost of living policies to ease these pressures and take another three quarters of a percentage point off inflation this year, and half a percentage point next year.”

KAREN:

If you talk to the opposition, they've got other views and they expect that this is going to be inflationary. And they say that the government has been causing inflation to rise over the entire term. I think the jury's out at this stage. The RBA will be particularly looking at the outcome of this particular budget, and it will be factoring it into its next decisions. But there are some elements of spending that, what they call off the books. And so therefore, there is that question mark about whether the new spending will add to the possibility of making inflation worse.

ASHLYNNE:

So finally, Karen, as you've said, this could be a really consequential budget for who wins the next election. So coming out of tonight, are there are some pretty clear battle lines that you can see that have been drawn with the Coalition?

KAREN:

So Peter Dutton will officially have his say on Thursday night with his traditional budget reply as Opposition Leader. But as you would expect, he's not cheering Chalmers on. Before seeing the entire budget, he addressed the Liberal and National colleagues, saying this was a magic pudding exercise by the treasurer and he's not delivering hope, rather broken promises. And the surplus has been denigrated by the coalition as a windfall surplus. And, what they are seeking is a structural surplus. You know, one by design. And, you know, do point out here that this is the coalition that did not deliver a surplus when it was in office over nine years. There's a blame game going on over inflation, and that will continue. Dutton with his economic team of Angus Taylor and Jane Hume are saying this inflation is now home grown, and it's the government's decisions of the past two years that have really driven it up. The government, of course, denies this and insists its budget measures are in fact de-inflationary and it has the budget papers to prove that.

Dutton is hinting at alternative policies. Budget day and the day after is not the day for that reveal. So we're yet to see what the coalition is yet to provide. But traditionally, oppositions don't give out too many things this far out from the election. But essentially what we've got here with this budget is ‘game on’.

Audio Excerpt – Jim Chalmers:

“And that's why I commend this Bill, Mr Speaker, and this Budget to the house.”

ASHLYNNE:

Karen, thanks so much for your time today.

KAREN:

Thanks very much, Ash.

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ASHLYNNE:

In other news…

Former military lawyer David McBride has been sentenced to nearly six years in jail for stealing and sharing classified documents with journalists.

The files alleged Australian soldiers had illegally killed civilians in Afghanistan. Earlier this month, McBride spoke to us here at 7am and said he had no regrets about his actions and the sentencing judge yesterday agreed he’d shown no remorse.

ACT Supreme Court Justice David Mossop said McBride had decided he knew best and didn’t want to follow the rules of the army.

McBride will have to serve two years and three months before he’s eligible for parole.

And,

In another court, former Jetstar pilot Gregory Lynn is on trial for the murder of campers Russell Hill and Carol Clay at an isolated Victorian campsite in 2020.

Prosecutors allege Lynn dumped the couples’ bodies and burned the evidence, but Lynn’s defence team says the deaths were a “tragic” accident in a dispute over hunting in the high country. The trial continues in the Victorian Supreme Court.

That’s all from us for today. Thanks for your company, we'll see you again tomorrow.

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