Taking stock of the 2024/25 budget season

With NSW Treasurer Daniel Mookhey’s second budget yesterday comes the end of another Budget Season.

Starting May with Treasurer Jim Chalmers’ Federal Budget, each state and territory has taken their turn to outline their visions and priorities for the years ahead.?

McKell’s locally-based team has been on the ground right across the country, speaking with and hosting Treasurers, governments and working with critical stakeholders in advance of budgets in Canberra, Brisbane, Melbourne, Sydney and Adelaide.

Our Federal Budget Analysis?and?state-by-state breakdown

“Jim Chalmers’ 2024-25 budget had to navigate contradictions: easing living costs without fuelling inflation, boosting housing affordability without stimulating demand, and enabling the energy transition while supporting blue-collar workers.”

– CEO Edward Cavanough and Victoria Executive Director Rebecca Thistleton

Our NSW Budget Analysis

“Despite the fiscal headwinds, the budget demonstrates that the NSW Government remains committed to tackling disadvantage, injecting new funds into the health system, delivering meaningful wage rises for frontline key workers, maintaining commitments to transport and public infrastructure delivery, and most crucially, genuinely addressing the most significant policy challenge facing the state: housing.” – CEO Edward Cavanough and Policy Analyst Max Douglass

Our QLD Budget Analysis

“In what is likely a surprise to no one, the focus of the budget is squarely on cost-of-living relief with further measures announced to complement the raft of policies announced prior to the Budget delivery. In total, this Budget has committed $11.218 billion in concessions in 2024-25.” – Queensland Executive Director Sarah Mahwinney

Our VIC Budget Analysis?

“This budget is responsible – and it is responsive. Treasurer Tim Pallas has always treated his role as an opportunity to drive economic growth by making smart spending decisions and creating jobs. While serious cuts have been made, Pallas has stayed loyal to his cause.”?– Victoria Executive Director Rebecca Thistleton

McKell Wins

In this budget cycle we saw several McKell Institute policy proposals become and remain government policy across the country.

• Social housing surge: The NSW Budget announced a record $5.1 billion in additional capital expenditure to build 8,400 social homes and an additional $1 billion for maintenance of existing homes. This follows from our call in March 2024 for a?‘surge’ investment into the state’s social housing system?following years of lacklustre investment in social housing.
• Toll relief:?The NSW Budget further committed to a continuation of the state’s extremely popular toll cap program, which?the McKell Institute first called for back in 2021.
• Abolishing nuisance tariffs:?The Commonwealth Budget abolished 457 nuisance tariffs placing an undue burden on importers, generating minimal revenue, and driving up consumer prices. Our 2024-25 Commonwealth Budget Submission called for a cut to import duties to?bring down pressure on importers and households.?
• Reforming non-compete clauses: Our Commonwealth Budget Submission called for the near-complete abolition of non-compete clauses in employment contracts, which the Commonwealth?looks poised to follow later this year.
• Tertiary loan reforms:?We called for reforms to tertiary loan repayments as a vehicle for cost-of-living relief. The Commonwealth followed suit by?cutting existing debts and reforming indexation.
• Mental health support:?The Queensland Budget included $3 million as part of its Mental Health and Alcohol and Other Drug Services funding line, as we recommended in our 2023 report?Communities in Crisis?with Lifeline Queensland.

Key Takeaways

Each of these budgets arrives in difficult macroeconomic times. Households are struggling to keep up with cost-of-living challenges brought about by higher-for-longer interest rates and? serious pressure in the energy and housing markets. Some major themes emerge:

Cost of living relief:?Cost of living relief, subject to fiscal and inflationary constraints, remains a focus of each budget. The Commonwealth and the states are increasing concessions to households in the form of increases to Commonwealth Rent Assistance (CRA), direct energy bill relief, and school vouchers.?

Bold action on housing:?These budgets show a steadfast commitment to meeting Australia’s future housing needs. Generational investments in social and affordable housing, unlocking of land, and changes to planning and density requirements are all welcome developments.?

Future-facing investments:?Capital intensive infrastructure investments remains a major theme across the budgets. As population growth and the energy transition put pressure on existing infrastructure, investments in transport, clean energy and manufacturing, as well as a skilled workforce, are fiscally responsible and desirable over the long term.??

Wage growth is back:?Commonwealth and state budget estimates see real wage growth returning over the forward estimates as inflation moderates. Further, explicit Commonwealth Budget commitments to real wage growth for the care sector and State Budget commitments to public sector pay rises both could not come sooner for our essential workers. The best possible cost-of-living relief remains getting wage growth back on track.