The centrepiece will be the Future Made in Australia policy that will include tax concessions, direct subsidies and grants aimed at new industries, which the government argues will provide long-term economic and environmental benefits to the country.
Already it has pledged $1 billion in government support for a quantum-computing facility in Brisbane and $1 billion towards a solar panel plant in NSW’s Hunter Valley.
Prime Minister Anthony Albanese said the budget reflected Labor’s values.
“It is a Labor Party budget through and through because it is a budget for every Australian, not just some. New investments in Medicare and the health system, more help for households doing it tough, more homes in every state and territory,” he told Labor MPs on Monday.
“The decisions that we make in this decade will set Australia up for the decades ahead, and that is what a Future Made in Australia is about. Making sure that we seize the opportunities that are there.”
The budget will also contain extra infrastructure spending, including $3.25 billion towards Melbourne’s north-east road link, $1.15 billion for a Sunshine Coast rail link and $1.9 billion for a series of projects across western Sydney.
Parts of the government’s universities accord will be confirmed, including a plan to change the indexation arrangements for Higher Education Loan Program debts that will cost $3 billion.
Extra money will be set aside to help victims of domestic violence, the full cost of paying superannuation on paid parental leave will be revealed, while the instant asset write-off scheme for small businesses will be extended for another year.
A key aspect will be the budget’s impact on inflation.
The RBA last week held official interest rates at 4.35 per cent but forecast inflation was likely to rise from 3.6 per cent to 3.8 per cent through the second half of this year. It is not expecting to have inflation back within its target band until the second half of next year.
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Its forecasts, however, did not consider any policies that will be announced by Chalmers in his third budget on Tuesday night.
The treasurer will reveal that inflation could fall to the target band by the end of this year, and be down to 2.75 per cent by the middle of 2025 as the government’s various cost-of-living measures take the edge off expected price increases. The Reserve Bank is forecasting inflation to still be at 3.2 per cent in June next year.
There are growing signs of the impact on the economy of past Reserve Bank rate rises. The Commonwealth Bank’s household spending insights index, released on Monday, showed a 1 per cent fall in April.
Credit: Matt Golding
Spending lifted in non-discretionary areas such as education and utilities, with households cutting expenditure on food, hospitality, recreation and transport.
It is not just households feeling the pinch. National Australia Bank’s closely watched monthly business survey showed firms winding back employment plans and expectations about the economy through April. Forward orders fell, while there was a moderation in costs for both labour and inputs.
NAB chief economist Alan Oster said the report pointed to a step-down in economic activity and overall inflation.
“Overall, these signs of slowing activity and easing costs support the outlook for gradual improvement in inflation from here, but how quickly this occurs remains to be seen,” he said.
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Source Agencies
