PETER VAN ONSELEN: Jim Chalmers insists the 2024 Budget is all about bringing down the cost-of-living for Aussies doing it tough – but will it be enough?

Treasurer Jim Chalmers will present his third Budget on Tuesday evening.

The big question: is this an election budget? Chalmers is convinced that this is not the way he puts it.

‘Oh no. What we have tried to do here is to be very attentive to the economic cycle, and that means a truly responsible budget, a properly restrained budget. But a budget that focuses overwhelmingly on pressure on the cost of living is something people feel good about,” Chalmers told me.

With elections scheduled for the middle of next year, and possibly before the end of this year, Budget 2024 could be the last before voters go to the polls.

So what do Australians think Chalmers should look out for in the budget on Tuesday night?

“Well, the cornerstone of the entire budget is a tax cut for every taxpayer. An average reduction of approximately $36 per week to help cover living costs,” Chalmers said.

These are the changes Labor made to the third phase of the Coalition tax cuts, characterized as a broken election promise after Anthony Albanese promised the statutory tax cuts would be delivered as he promised.

But Chalmers and Albanians have made no apologies for breaking that promise. Chalmers made it clear that he has changed the format of the cuts to benefit younger voters who he believes have been “losing for too long.”

“People can expect that (the newly designed income tax cuts) to hit their bank accounts from July. We think that is very important. It is the largest part of the cost of living that is included in the budget, but not the only part,” Chalmers emphasized.

Another form of relief in the 2024 Budget is a reduction in the indexation of higher education contributions (HECs), backdated to last year.

“That’s about recognizing that students got a shot in the neck last year when inflation was particularly high in the way their student debt was calculated,” Chalmers said.

But what about the millions of taxpayers who are subsidizing this change and who either didn’t go to college or have already paid off their debt without the help? There is anger among such groups.

‘Oh, I understand. It is rare that a government decision, even if it is a good decision, receives unanimous support… but that is not all we are doing in the budget,” he said.

Other budget measures highlighted include pouring more money into housing as part of funding agreements with the states.

“The Budget will build quite substantially on the $25 billion we are already investing in building more homes for Australians. We know we don’t have enough housing, which is why rents are higher than we would like. That is why people find it difficult to gain a foothold in the market,” said the treasurer.

Chalmers described the election pledge to build 1.2 million new homes by 2029 as “ambitious but achievable”, but in a sign that he recognized they might not get there, he also noted “that will be difficult, but it is not impossible’.

Currently, the construction of new houses is well below the level needed to achieve the promised goal. To encourage that, Chalmers said building a construction workforce is critical.

“That’s why we’ve announced these 20,000 free opportunities for people who want to work in the building and construction industry,” he said.

The budget is being implemented in the context of too high inflation and recent reports have suggested that there is even a chance that interest rates will go up, not down. In any case, the previous expectation that they would fall this year now seems less likely.

How does the treasurer view the challenge of reducing inflation?

“It’s really the defining focus of the budget, to provide as much relief as possible,” he said.

But that help – in the form of more spending – could have the opposite effect and fuel inflation. Chalmers is well aware of the balancing act.

“That’s really what we’ve been struggling with most of the time, honestly, as we’ve been crafting this budget.

“So balance sheet is really the word that defines this budget,” Chalmers stated.

Living standards in Australia have suffered the biggest decline in more than half a century. Chalmers is keen to share the blame for this reality with the coalition.

“Oh, when we came to power we were very aware that one of the big problems was that people’s wages were going down,” Chalmers said.

“That was a combination of high and rising inflation in the first half of 2022 (when the Coalition was in power) combined with a decade of wage stagnation (during which the Coalition was largely in power).

“And so we’ve worked very hard to turn that around.”

Chalmers cited rising real wages in some parts of the economy as something he is proud of in his first two years in office.

Asked for a simple way to judge whether Budget 2024 will be a success or a failure by the time of the next election – if interest rates don’t rise you’re doing it right, if they are you’re spending it wrong done, Chalmers rejects the binary number choice.

‘I think that is too simplistic a view of things. “My job is to try to meet this inflation challenge and help people survive and invest in the future.”

Former Treasury Secretary Ken Henry, who Chalmers worked with when he was a staffer to then-Treasurer Wayne Swan, has described the booming trading conditions enjoyed by Chalmers and other treasurers as “dumb luck” that saves Australia from political decision-making.

When asked if he agrees that dumb luck got him where he is, Chalmers pauses for a moment and says, “Uh, no, you won’t hear me say that,” then adds, “but there are some very important parts of that question’.

“First and foremost, we appreciate the important role the resources sector plays in our economy… we can’t say that enough.”

Labor is desperate to regain the number of WA seats it won at the last election.

The Treasurer also emphasized the strength of the labor market: “780,000 new jobs created under the Albanian government and the revival of wages.”

Chalmers noted that “revenue increases” in the budget are in no small part a result of “the strength of the labor market.”

But what matters is what the government does with the increase in revenues that the terms of trade has helped.

Chalmers is adamant that “we poured an overwhelming amount of money into it over the course of the first two years in office. Our predecessors spent most of it. We saved most of it.”

“That made a big difference because it meant we could reduce debt and pay less interest on that debt,” he said.

But while the 2024 Budget is expected to show a surplus for this financial year and the next, the budget for the coming years is also likely to forecast deficits. And many economists have raised concerns about the underlying structural deficit – when unexpected booming revenue sources are removed from budget outcomes.

With more than a trillion dollars of government debt built up and higher-than-expected interest rates, there is an argument that Labor should spend even less than it claims.

That appears to be the direction that opposition leader Peter Dutton will take in his response speech on the budget on Thursday evening. By linking the challenge of spending on rising debt burdens in the future with the stimulative impact this has on inflation.

Chalmers’ Budget forecasts suggest he will get inflation into the 2 to 3 percent range sooner than most economists predict. Also earlier than the Reserve Bank of Australia predicted.

“Inflation has fallen since 2022,” Chalmers said.

“What we’re trying to do is design our cost-of-living assistance so that we can take some of the sting out of the inflation that all your readers are suffering from.”

That sounds like the key performance indicator on which the Treasurer and the Labor Government should be judged at the next election. It is a risky venture, but they are ready for the political battle.