Limping economy lumps Chalmers with trickiest budget yet
There is a lot of pain in the economy and this poses a challenge for the May budget.
Treasurer Jim Chalmers is now staring down the most difficult federal budget since Labor took government in 2022. Today’s national accounts show the economy is in pain, which typically means intensifying pressure on governments to spend. But while inflation has come down the fight against it is not yet over, meaning it would be prudent for the government to exercise spending restraint in May.
In the last quarter of 2023, the economy expanded by a mere 0.2%. That brings total growth to 1.5% over the year. With the exception of the pandemic, this is the weakest economy in more than two decades.
Chalmers has spent his time as Treasurer focused on budget restraint to provide enough support to the public without making inflation worse. Rent assistance, utility bill relief and stage three tax cut changes have been popular and made a meaningful difference in household spending while not derailing the inflation fight for the Reserve Bank.
Now, though, he has to prove he can tackle a new “combination of challenges”. Front of mind will be how to support economic growth at a time when the inflation fight isn’t completely over.
