A closer look at the 2024 budget and what it means for Australia's economy I spoke earlier with ABC Chief Finance correspondent Ian Verrender. He says it's not clear how the energy subsidies will affect inflation.
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00:00 There's a certain logic that says yes, and that would be the traditional economic argument
00:07 that if you've got this amount of money and no matter whether you're actually spending
00:12 it or sending it out into the economy or you're somehow distributing it, then it will add
00:16 to aggregate demand.
00:17 But I'm not sure that's the case because the experience we've just seen this year with
00:23 the energy bill relief tends to suggest that that may not happen.
00:28 And the Bureau of Statistics actually on several occasions came out with studies that said
00:34 the measures that the government had taken last year, or this financial year, had not
00:39 done that and that it had in fact relieved inflation.
00:43 I mean it's an interesting psychology behind it, isn't it?
00:46 Yeah, absolutely.
00:47 Either giving someone $300 or actually just making their bill $300 less.
00:50 Well if you get $300 in your pocket and you walk down the street, if I handed it to you,
00:55 you'd go whacko.
00:56 We're off to the restaurant or the pub.
00:59 Absolutely.
01:00 Whereas what's going to happen now is that four times a year you'll simply get a $75
01:05 reduction on your bill.
01:06 So if your bill was going to be $400 and it comes in at $325, are you going to go through
01:11 all the paperwork and say oh there's a $75 discount?
01:14 You're just going to simply pay the $325 and write off the rest of it because it wasn't
01:19 there in the first place.
01:21 And so I think it is a really interesting dynamic when it comes to the psychology of
01:26 all of this.
01:27 If you don't actually have access to the cash, are you going to spend it?
01:30 If it's simply going to be listed as a discount, you're just going to spend the money, well
01:34 pay the bill, and not go out and spend the extra $75 each time.
01:38 We'll see what plays out obviously over the ensuing months.
01:41 I want to talk about household finances now versus the national state of affairs.
01:47 Household finances are looking somewhat rosier and that's probably thanks to the tax cuts
01:53 and real wages growth happening for the first time in quite some time with those inflation
01:57 forecasts coming down.
01:59 That's somewhat different to the position of the national accounts though isn't it?
02:03 It's almost diametrically opposite.
02:06 And if you look at the budget papers from last night, you'll see that there's a real
02:10 bounce in consumer spending and that's forecast primarily off the back of three things.
02:17 One is the tax cuts that are coming through.
02:20 The second is that real wages are going to be growing for the first time in many years
02:24 because inflation has come down.
02:26 We've still got wages growth.
02:28 There were numbers out today that were a little softer than expected but it's still growing
02:32 and it's going to be slightly in the positive which means real wages growth and there is
02:37 still the outside chance of a rate cut later on this year.
02:43 On the one hand we've got this amazing recovery in household finances that's projected to
02:48 take place this year while the federal budget slips back into deficit.
02:54 And the main, the common factor there I guess is the fact that you've got this $20 billion
02:59 of tax cuts eroding the coffers in the federal budget and propping up household expenditures
03:08 there.
03:09 After the surplus we're going to see three more deficits there.
03:12 There's been a lot made particularly by the opposition that this budget and this government
03:16 is not addressing the structural problems in the economy.
03:20 Should there have been more made to address the structural deficits?
03:23 We've had structural problems and structural deficits really going back about 15 years.
03:29 You know they need to be addressed.
03:32 There's no doubt about that.
03:34 But as I said our debt situation is not out of control by any stretch of the imagination.
03:39 It's very, very low by international standards for a developed country.
03:42 The only issue would be that we are a country that relies very much on resource exports
03:48 for our foreign income and resources can really fluctuate.
03:54 So if we had a much more diversified economy where we were producing all sorts of different
03:59 things it wouldn't be any issue at all.
04:01 But given we rely so heavily on commodities and one commodity in particular to one major
04:07 customer, it could be a problem in the future.
04:10 So there is certainly scope to address that structural imbalance there.
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