The federal government’s October mini budget gave little indication as to how it seeks to address the key economic issues facing the nation, namely: uncontrollable government spending, skyrocketing debt and stagnating growth.
By the middle of the decade, government spending will be locked-in at 27% of gross domestic product, reaching a record high of $729 billion by the 2025-26 financial year. Spending as a percentage of GDP will be consistently higher than in any pre-Covid year since the 1980s.
Gross government debt is set to escalate from $895 million to $1.16 trillion by 2026 – almost half the size of Australia entire economy. Interest repayments are the fastest growing expenditure item in the budget. According to treasury estimate, repayments will – on average – increase by 14.4% p.a., reaching over $32 billion by 2026.
The budget reinforces the findings of IPA research, released in August, entitled Australia’s Debt Disaster, which estimates that in an economic environment of rapidly rising interest rates, annual debt repayments could rise to between $75 billion and $89 billion by 2030 – approximately double our current defence budget.
Economic growth is forecast to collapse, from 3.25% this year to 1.5% in the next financial year. This means that Australia is heading into a period of stagnating growth coupled with inflation; that is, a period of stagflation.
An immediate solution to address the impending stagflation is to repeal the Climate Change Act and scrap the policy of net zero emissions by 2050. Doing so will not only reinvigorate the energy market and resources sector, and bring life to rural and regional communities, but also provide much needed cost of living relief to Australian households facing the prospect of skyrocketing energy prices – without putting on inflationary pressures.
After both sides of politics having asserted for years that more renewables means lower prices, the government has now conceded that: more renewables, in fact, means higher prices – not lower.
Treasury estimates that energy bills are set to increase by up to 20% by the end of the year. In the next financial year, this will increase further to 30%, adding up to over 50% of what are already record high prices today.
This is exactly what the IPA predicted, with landmark research, Australia’s Net Zero Energy Crisis, showing that under the policy of net zero emissions by 2050, energy bills would at least double by 2030. The net zero policy is still supported by both sides of politics despite the impact it is having on families across the country.
The political class’s obsession with unreliable, expensive and experimental renewables continues to distort the energy market, thereby pushing reliable and affordable baseload power generation facilities off the grid.
Spending on the NDIS is set to increase by 13.8% per year, making it the second fastest growing spending item in the budget, behind only interest payments on debt.
By 2026, the NDIS will cost close to $52 billion per year – almost 20% higher than the budgeted defence spending. Without major reform this rate of spending increase will be unsustainable in the medium to long term.
Finally, the mini-Budget fundamentally failed to properly address what is perhaps the biggest immediate economic challenge Australia is facing, which is the unprecedented, nation-wide shortage of workers.
Today, there are 480,000 job vacancies across every industry in Australia.
Australia’s worker shortage is being exacerbated by current pension rules, which see recipients lose half of every dollar of their pension for every dollar they earn above $480 a fortnight in additional income.
Getting more pensioners into work means higher wages, more spending power, a bigger economy, and more tax revenue which can be invested in schools, roads and hospitals.
Any Australian, particularly pensioners, who want to work, should not face unnecessary barriers to getting a job. More needs to be done to address this and the government has failed to do so.
Last night’s mini-Budget has failed to begin the hard task of addressing the fundamental economic problems facing the nation. Australia needs a government that is willing to roll up its sleeves and get on with it, without delay.