Archival tape – Jim Chalmers:

“Mr. Speaker, the budget we present to the Australian people tonight provides cost of living relief that is responsible, and affordable, and prioritises those most in need.”

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SCOTT:

From Schwartz Media, I'm Scott Mitchell, filling in for Ruby Jones. This is 7am.

Archival tape – Jim Chalmers:

“We are now forecasting a small surplus in 2022/3, which would be the first in 15 years.”

SCOTT:

The government has delivered the first budget surplus in 15 years while modestly raising rent assistance and JobSeeker. But advocates say it doesn't go far enough. And with the cost of living biting, should the government have spent more on people most in need? And did it tackle the biggest challenges in the budget or put them off?

Today, chief political correspondent for The Saturday Paper, Karen Middleton, on what this budget says about the government's priorities, and the tests that still lie ahead.

It's Wednesday, May 10.

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Archival tape – Jim Chalmers:

“Speaker. In all of our decisions, we seek to strike a considered, methodical balance between spending restraint to keep the pressure of inflation, while doing what we can to help people struggling to make ends meet.”

SCOTT:

Karen, There has been a lot of speculation about what relief there would be for people doing it tough in this budget. What was actually in this cost of living package that we've heard so much about?

KAREN:

Well, actually, maybe a bit more than we expected and perhaps a bit broader than we expected. So what we've seen is a government being very careful about where it targeted the money, and finding ways to give people help that wasn't going to amount to cash, sort of, raining from the heavens and stimulating the economy too much. So they've looked for ways and for places that they can put money that will assist people most directly.

Archival tape – Jim Chalmers:

“The pressures on the budget are acute. But as a Labor government, we will always strive to help those who need it the most. That's why tonight we announce a $40 per fortnight increase for JobSeeker recipients.”

KAREN:

JobSeeker. There's a rise across the board of $40 a fortnight. Now that's a lot less than a lot of people would have liked. They were talking more in the realms of having JobSeeker at $50 a day extra, not an extra $40 a fortnight, which is the equivalent of about $3 extra a day. So that's not going to satisfy everybody, but it is an across the board increase, and there is an extra supplement for people over the age of 55 that already existed for over 60 and they've extended the age range down to 55.

Archival tape – Jim Chalmers:

“Speaker, for too long, secure, affordable housing has been out of reach for too many Australians. Tonight to help ease the pressure on people feeling the pain of rising rents. We are increasing the maximum rates of Commonwealth rent assistance by 15%.”

KAREN:

An increase of rent assistance. We also weren't expecting, but only a 15% increase to the maximum Commonwealth rent assistance available to those who are eligible. And big boost to bulk billing, we also didn't expect that.

Archival tape – Jim Chalmers:

“As a centrepiece of this budget, our Labor government will triple the bulk billing incentive.”

KAREN:

That's targeted at concession card holders, and under sixteens accessing GP consultations, a tripling of the bulk billing there.

Archival tape – Jim Chalmers:

“This is the biggest increase to the incentive ever, delivering a three and a half billion dollar boost that will help GP's provide free consultations to around 11.6 million eligible Australians.”

KAREN:

The Treasurer was a bit defensive at the suggestion that the assistance was only targeted at low income earners. And he said “no, I'm also giving money in middle class relief.” There are things like assistance and concessions on power bills that we'd already heard about, and some low interest loans designed to help people transition their homes to more renewable forms of energy.

Archival tape – Jim Chalmers:

“And tonight, we are delivering up to $3 billion in direct energy bill relief for eligible households, and small businesses, co-funded with the states and territories.”

KAREN:

So there's a whole suite of measures under this, sort of, $14.6 billion direct cost of living package, and some other associated measures that are all really aimed at finding clever ways to offer concessions and financial support, that doesn't involve just handing out fistfuls of cash.

SCOTT:

And so some of those cost of living measures you mentioned, Karen, a 15% increase to rent assistance, the $40 per fortnight increase to JobSeeker. These changes are well below what advocates in those areas have been calling for. How are people who rely on that support going to take this targeted approach?

KAREN:

Well, I think this will be interesting to see, but I suspect there's a great risk that the government will be accused of not having done enough. The Greens, for example, have been calling for rent freeze, so they're not happy about the level of rent assistance, or the breadth of it. Advocates that were supportive of a much greater rise in the JobSeeker allowance. They say that this is not enough. And the biggest problem the government faces, of course, is that it needed to balance this idea of being compassionate, and understanding the level of need in the community because of the pressures on costs of living and being fiscally responsible. They're super conscious that Labor's reputation, historically — fairly or not — is that it wasn't as good at managing the economy as the coalition. So it's very keen and the Treasurer himself is very keen to prove that it can do that and to shake that reputation off. But it's faced with a circumstance where it needs to throw money into the economy to support people, but not so much as to be inflationary and undermine that imperative to be seen, to be responsible.

SCOTT:

And as you say, Karen, this government has really stressed it has these solid credentials on not wanting to leave anyone behind from the moment he was elected, Anthony Albanese talked about his own experience growing up in public housing, with a single mum, on a disability support pension. But we know that social and affordable housing is in crisis at the moment. What measures were in this budget to deal with that?

Archival tape – Jim Chalmers:

“We want more Australians to know the security of a roof over their head, which is why we're also working with the states and territories to improve planning, to build more houses, and to deliver a better deal for renters.”

KAREN:

Well, aside from the issue around Commonwealth rent assistance, there were some measures to encourage investment in community and social housing. So to offer some incentives for investors to build that kind of housing.

Archival tape – Jim Chalmers:

“Implementation of the $10 billion Housing Australia Future Fund is critical to build more of the social and affordable houses that our people need.”

KAREN:

And of course, the government is still pushing very hard outside of the budget for its Housing Future Fund, which is a $10 billion investment fund designed to inject money into social housing. Now that's been held up in the Parliament at the moment, and the Greens in particular are very unhappy with the size and shape of that. They wanted a rent freeze. They wanted a lot more out of the government than that. And now the government is putting that into the Parliament this week, and really staring down the Greens because the negotiations on this point have stalled. And I think they're really daring the Greens to vote against this massive injection of money for future housing investment, even though the Greens say it won't do enough soon enough. They're daring them to vote against it. So we're in a staring contest on that legislation. Aside from these other measures that are in the budget.

SCOTT:

Coming up after the break: why the surplus may be short lived.

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SCOTT:

Karen, We suspected this budget would deliver the first surplus since the Rudd government was in office. Given what we've heard about the big challenges the Budget faces, how did they manage that?

KAREN:

Well, they had a lot of good luck, and it's sort of uncomfortable good luck in a sense, because a lot of this money is a by-product of the war in Ukraine, which has pushed up the price of the sorts of commodities like iron ore that Australia is selling to the rest of the world. So we have a windfall gain from that situation that has really boosted the tax receipts for the Federal Government. And of course, post the emergency phase of the pandemic, we've seen a boost in employment. Unemployment is very low. That assists tax receipts as well. We've got a flood of incoming migrants who've been locked out of the country for a long time. So this has all assisted the budget bottom line, and meant that the Treasury's been able to deliver this sort of momentary surplus. Now, it's a huge turnaround compared with the forecast deficit of tens of billions of dollars in the other direction from just a year ago. And the Treasurer is really seeking to prove that he can get the budget into surplus, that he is responsible, even though this surplus will only, according to the Treasury's forecasts, hang around for this one financial year, and then will be back in deficit for the next three years before things start to turn around in a more positive direction. That's all based on an assumption that those commodity prices won't last, and that things will go back to normal, which means we won't have that revenue stream for very long. Now, that might not be the case. They may find they do have extra revenue for a while, but they're not prepared to bank on that, and to take a punt. So they're assuming that they'll have less revenue, and hoping that things might be different. And that means they do still have some work to do, in terms of structural adjustment to the budget. And there are plenty of people who are going to say this budget doesn't go far enough in that direction, as well as those people who might suggest that it perhaps could have been more generous than it was.

SCOTT:

And this surplus that we are in, at least for now, it could have been bigger, couldn't it? The government didn't axe or reduce the stage three tax cuts, which are set to cost the budget $69 billion when they're eventually factored in. Are there missed opportunities here for the government to have taken on some of the more difficult challenges that are in the budget?

KAREN:

Well, potentially, and that is one of the criticisms that's being levelled, that it perhaps wasn't brave enough. Certainly people on the crossbench, some of the Teal independent MPs, David Pocock in the Senate are saying that, that they thought the Government should have gone harder and done more. Now, you know, it is a responsible budget in the sense that the Government was extremely conscious of the risk of overstimulating the economy and making the problem that it's trying to solve worse in terms of inflation. And that's the measure against which this budget will be judged in the end, whether it does do what the government says it will do, and actually bring down inflation. And that's its bold prediction that it will actually have a moderating effect on inflation, or whether it will push it the other way. So, it doesn't address some big things like, as you say, the stage three tax cuts. They are due to be delivered in the middle of next year. They've already been legislated. They were legislated under the previous government and the Labor Party decided not to oppose them, because it recognised this would have been a political liability through the election campaign. But now it's stuck with them. I think it's probably desperate to find a way to get out of them between now and next year, but it does have one more budget between now and when those tax cuts are due to take effect. So we'll see whether they do anything about that, and they still haven't really seriously addressed the deep structural problems in the budget. We have all these areas that are permanently entrenched areas of high cost, and growing costs, health, aged care, defence, the National Disability Insurance Scheme, really haven't addressed that substantially at all. Maybe it's a down payment on the future, but there were plenty of people saying that this was an opportunity to have done more in the first year of a three year term, and the government has elected not to do that at this stage.

SCOTT:

And just finally, Karen, you know, this is the government's first budget that they will wholly own themselves. Last October, what we saw was more of an adjustment to the Coalition budget to deliver some urgent election promises. So what kind of Labor government do you think we're seeing and what's the biggest thing you learned watching the Treasurer tonight?

KAREN:

Well, it is an interesting point there, Scott. Because I think that's kind of deliberate that they're now putting some distance between themselves and the Coalition. So the Coalition has less of a leg to stand on in terms of saying, “Well, we delivered you to this position” because Labor now has one of its own budgets in between. So I think what we're seeing is how conscious Labor is, not only of being a Labor government in the traditional sense of being the government that supports people and does deliver assistance, particularly to those most in need, but also being the responsible economic manager to change the story about Labor historically, to own the idea that they are the more responsible manager of money, that they won't have billions of dollars in handouts come election time and the like. So I think they're starting to change the story and that's what we've learnt from the budget. But they haven't yet succeeded in showing exactly how they will change the structure of the economy so that there are income streams to pay for the things that will support those low income people going forward.

SCOTT:

Karen, thank you so much for your time.

KAREN:

Thanks, Scott.

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SCOTT:

Also in the news today…

The chief executive of PwC Australia, Tom Seymour, has resigned. Following revelations the firm made $2.5 million dollars in fees by using confidential government information.

PwC, an accounting and consultancy firm, was hired by the federal government to help redesign the tax system to better cover multinational corporations – but confidential information from that project was spread throughout PwC and used to help other clients.

And…

Vladimir Putin has declared, quote: “There is no cause stronger in the world than our love for our armed force.”

The Russian President spoke in public for the first time in months at a parade of the military through Moscow’s red square. The event marks the anniversary of the defeat of Nazi Germany in 1945.

I’m Scott Mitchell, this is 7am. We’ll see you tomorrow.

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