Treasurer Jim Chalmers puts cyclone-sized dampener on Budget hopes

Treasurer Jim Chalmers has sought to lower public expectations in what promises to be an uninspiring pre-election Budget next week, warning ex-cyclone Alfred will cause a dent in the nation’s coffers.

The Government is attempting to steer attention away from what are likely to be disappointing figures, but things aren’t looking much better for the Coalition, which has been exposed for its lack of answers in its Budget preparations.

The cyclone — widely believed to have delayed the Prime Minister setting an election date — was likely to blow a $1.2 billion hole in economic output after 12 million work hours were lost when businesses closed down, Dr Chalmers said in Queensland.

“We’re getting a handle on the economic costs and we’re getting a handle on the cost to the Budget. We will report our initial assessment of that in the Budget, Tuesday next week,” he said.

“Recovering and rebuilding from natural disasters will be a key influence on the Budget.

“We also anticipate that there will be some impact on fruit and vegetable costs, depending on how much of the farmland has been impacted.

“We’ve made a heap of progress on building and construction in the inflation numbers, but depending on how much rebuilding will be necessary, we can anticipate some upward pressure on building costs.”

Dr Chalmers also signalled the Budget would be handed down with a deficit forecast for this year. However, he pointed to debt being much smaller than the “trillion dollars” that Labor had inherited from the previous Coalition government.

On Monday, the gloves came off between Dr Chalmers and shadow treasurer Angus Taylor in a fight over a Budget that nobody really expected ahead of the Federal election.

One week out, and with neither side yet to signal major new policies to sell to voters, political squabbles are filling the void.

Dr Chalmers accused Mr Taylor of “egregious” dishonesty over his claims on Monday that income taxes were $3500 higher for the average worker in the past financial year than they were before the 2022 election.

“We provided a big tax cut in the middle of last year,” Dr Chalmers said of the reworked stage 3 income tax cuts, slamming the Coalition for opposing tax relief.

The Treasurer said figures used by Mr Taylor during a round of media interviews on his pre-Budget campaign blitz of marginal seats pointed to a period before Labor’s tax cuts came into effect.

“This is an egregious bit of dishonesty for him to put out numbers from before more than $20 billion a year in tax cuts that are rolling out right now,” Dr Chalmers said

“He should visit every marginal seat and tell millions of Australians that he tried to deny them the cost-of-living help that they need and deserve.”

Mr Taylor hit back at the “out-of-touch Treasurer” who “does not even know how much tax Australians are paying”, doubling-down on his claims that the average dual-income household would be forking out $7000 more in tax this year.

“This is the biggest spending, biggest taxing government in Australian history,” he said, pledging the Coalition would restore a tax cap abolished by Labor in its first Budget.

“This upcoming Budget must ... reduce wasteful spending, so Australians don’t face higher taxes on top of higher inflation.”

The Coalition has also faced pressure, both internally and externally, to produce more defined and costed economic relief policies before the election, which must take place by May 17.

Asked if Mr Taylor had what it takes to be treasurer, former prime minister Malcolm Turnbull was blunt.

“The only thing you need to be the treasurer is to be a member of the House of Representatives,” he said.

Opposition Leader Peter Dutton has tempered expectations about significant cost-of-living policies, repeatedly falling back on claims about the Coalition’s reputation for better economic management while promising detailed announcements are still to come.

On Monday, he refused to commit to income tax cuts.

“We want a simpler fairer tax system. We want Australians to pay less tax,” he said, but added that lower taxes were contingent on whether it was “prudent” to do so.

“If we can afford to do tax cuts, we will, but it will depend on how much money is in the Budget, what’s going to be inflationary, what other measures are floating around at the time.”

The Coalition had “not been even really tilling the ground for any major policies other than nuclear” energy, said Dr Greg Jericho, chief economist at the Australia Institute.

“We all thought that the ‘22 election was all about a small target strategy, but this is really going even further, it’s really a sort of ‘magnifying glass’ time to find anything,” he said.

Neither side of politics was willing to address new taxation reform to avoid accusations of putting pressure on inflation, Dr Jericho said.

“So, it does set up for a bit of a small Budget … and then having a very small election campaign where we’re arguing over minute differences, trying to make them sound like they are huge.”

Labor may be aiming for one big announcement next week in the form of extending a rebate for household energy bills, but otherwise they may be gearing up for “a Budget that hopefully everyone quickly forgets” by the start of the election campaign, Dr Jericho said.

The Government may point to the cyclone, trade tariffs and speculation about a US recession that could slow down global growth, to explain any changes in forecasts for domestic growth and revenue.

“I think it could be a case of there being a bigger than previously expected deficit, and so they might be wanting to make sure that they can explain why that has occurred, and why they shouldn’t be blamed for it,” Dr jericho said.

External impacts on the national budget may be a tough sell for the average voter desperate for cheaper household bills.

Constituents were “maxing out their credit cards, really using everything they can just to get by”, Mike Freelander, the Labor MP for Macarthur in NSW.

But he said people were “pretty realistic” about next week’s Budget and the international and domestic pressures impacting the cost-of-living.

“I think they understand we’re trying to do what we can. But they do hope we will do more,” Dr Freelander said.