EDITORIAL: Don’t be fooled by budget’s cheap political tricks

Of all of the furphies we’re told by our politicians on the regular, this has got to be one of the biggest, and most eye-roll-inducing.

“I don’t see this Budget in political terms,” Treasurer Jim Chalmers said in his post-budget address to the National Press Club on Wednesday.

Dr Chalmers wants us to believe he’s motivated purely by economics. He reckons he’s devised a way to simultaneously achieve two contradictory goals: easing cost-of-living pressure on households without jeopardising efforts to tamp down inflation.

On the first goal: Sure, if you think that shaving $75 a quarter off your electricity bill is going to significantly improve your household finances. But for most families, hammered by the RBA’s brutal tightening cycle of the past two years, that amount will barely touch the sides.

And on the second: kinda, sorta, not really.

Dr Chalmers says his $300 per household power rebate, as well as a 10 per cent increase to the maximum rate of Commonwealth Rent Assistance, will see inflation fall to 2.75 per cent by the end of this year. That’s within the RBA’s target band of between 2 and 3 per cent, and so theoretically, a rate cut from the RBA should follow.

But the problem is that it’s all a bit of technical tomfoolery rather than a genuine reduction in the consumer price index.

And the Reserve Bank is a little smarter than that.

As KPMG chief economist Brendan Rynne points out, the rebates will lower the power component of the CPI, leading to an artificial reduction in the headline figure. But there has been no change to the actual cost of supplying energy — it’s just that someone else is temporarily footing the bill. As soon as those rebates come to an end, inflation will jump straight back up again.

There’s also the fact that freeing up a bit of money from household budgets will see a spending bump in other areas of the economy, which will have a direct, albeit mild, inflationary effect.

Economists say the this Budget will likely mean the RBA will delay a rate cut — exactly the opposite of what households desperately need.

But it fulfils the Government’s political need, as we head into an election year, to be able to hand-on-heart (kinda) claim they returned inflation to within the target band. It’s not their fault the big meanies at the RBA didn’t cut rates accordingly.

It’s also mighty convenient that the $300 rebate will technically fulfil Prime Minister Anthony Albanese’s promise to reduce annual household energy bills by $275. Hey, presto, they’ve done it.

This is a purely political Budget, motivated by Labor’s desire to win another term at next year’s election. This is a shame for Australian taxpayers.

If it weren’t, perhaps Dr Chalmers would have felt compelled to devise a more sincere way of actually addressing inflation and pulling the economy out of structural deficit.

Instead, all we’ve seen are a few cheap political tricks that will do little in the short term and push us back into the red in the long term.