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Misplaced Priorities: Examining the Flaws of Australia's 2024 Budget

May 27, 2024

7 min read

Purpose of the Budget

The purpose of a budget is to outline the future allocation of spending by an institution/government, and it lists it’s annual financial report, where government estimates revenues (taxations, donations, dividends and asset sales) and expenditures (subsidies, rebates, general spending) for the remainder of a budget cycle (generally 1 year). It’s often used a a public statement to outline the current government’s priorities regarding the economic activities of Australia, and abroad.

Budget Aim

The general aim of the budget is to facilitate either increase economic growth through an expansionary budget or limit/decrease economic growth through a contractionary budget. Depending on the amount of revenue or expenditure, the government may achieve a budget surplus (when revenue is greater than expenditure), a budget deficit (when expenditure is greater an revenue) or a balanced budget, when both are equal to each other.

The Budget Overview

In the 24-25 Federal Government Budget, the Labor government decided to deliver a budget surplus, while attempting to manage current societal issues such as cost of living, housing and education within the nation. To ease the cost of living, the government has proposed amendments to the current tax brackets, and have as a result provided July 1st Tax Cuts, reducing the previous 19% tax rate to 16% (ATO, 2024).

figure 1 - Monthly/Quarterly CPI | Source: ABS/RBA

This cut was to ensure a reduction in cost-of-living pressures, which were caused primarily from support packages and spending during the COVID-19 Pandemic, market failure in regards to oligopolies and duopolies and homegrown inflation (figure 1) caused due to a shift right in aggregate demand, as well as quantitative easing as part of the RBAs COVID policy, all contributing to a general increase of prices after COVID.

Another part of the budget was the guarantee of a $300 energy rebate for all households which further supports people during the cost of living crisis as well as Australia’s energy uncertainty due to the Russian invasion of Ukraine, and the cancellation of coal/natural gas plants over the years due to climate activists.

Renewable Energies Investment, University Caps

The government has decided “to invest $1.5 billion into renewable energy technology for made in Australia plan” (Jim Chalmers, 2024) to help with the past energy crisis and current ambiguity regarding the sector’s direction. To attempt to deal with the housing crisis, the government has placed caps on foreign students attending domestic universities which in the long run will be able to allow supply to catch up with demand easier.

Additionally, this Government has also decided to forgive over $3 billion in HECS debts for 3 million Australians, and to support studying teachers they allocated a $319 weekly placement payment to take pressure of these individuals. Other changes include price capping medicines, flood and drought support for farmers and $5.7 billion In defence spending.

Problems With the Budget

The budget was originally claimed to “have something for everyone” (Anthony Albanese, 2024), but lacked much support for unemployed people and the community services sector, with groups such as Vinnies Australia and The Salvation Army being quite disappointed by the May 14th outcome, with Vinnies claiming the government needed to “increase the base rate salary of workers” (SVDP, 2024). The only big winners being women’s support, with $967 million in funding allocated, as well as disability/care home workers, receiving $227.6 million respectively. My perspective on the failure of the budget is allocating too much funding and regulation on social issues such as Digital ID, the National Firearms Register and clean energy investment, rather than prioritize on building more houses, or preparing for nuclear or other energy alternatives.

Opposition Concerns on Immigration

Although the current government have taken measures to support housing by cutting immigration, they have failed to act on it prior to this year’s budget. As stated by the leader of the opposition “more than 1 million people have immigrated to the country after COVID, with only 265,000 houses being built” (Peter Dutton, 2024), along with this, Mr Dutton has plans to slash migration by 25% in the upcoming 2025 federal election. Migration has resulted in a shift right in demand while supply has been limited due to lower than average domestic investment, and high LGA regulations, and a current shortage of builders, with “well over 90,000 tradies required for next months home constructions” (Jordan Shanks, 2024). Some of this can also be attributed in the defunding of TAFE under various liberal governments throughout the 2010s

Greens response to the Budget

Teal independents and the Greens were disappointed by the budget outcome, not taking greater actions on fossil fuels or investment into green technology and energy. An official response from the Greens stated that “Labors third budget betrays those who are doing it tough” (Adam Bandt, 2024). From the Greens perspective, the cost of living crisis has brough people to breaking point and almost nothing has been done to help those struggling, the unemployed or single family individuals. Although if more action was taken it would result in further inflationary pressures to the Labor government.

Commodities in Deficit

The main problem with this budget is that it has failed to address long term fiscal policy problems, with massive projected deficits for the next 10 years. It’s also conflicting at various points in regards to cost of living support, and fighting inflation, as one could suspect the July 1st tax cuts, $300 energy rebates and student debt forgiveness will result in an increase in consumer spending. Additionally the budget has failed to responsibly address the critical minerals required in renewable energy technology (e.g Silver, Copper, Gallium).

From the Silver Institute’s January report, it is noted that there is a current global supply deficit of over 467 million ounces Silver (The Silver Institute, 2024), ½ billion ton deficit of copper (SmallCaps, 2024), and “regional supply shortages of gallium and germanium due to instability in zinc production, and mining disruptions” (Deloitte, 2024) This comes at a time where we have seen a 17% increase in silver demand between 2021-2023, and a 3% decrease in recycling. Although there is massive direct investments of $1.5 Billion, all of this is directed to non-ferrite minerals and neodymium materials only useful in battery storage, not energy production technology such as PV panels or wind turbines. I believe that it is more important for funding to be allocated to more essential minerals, as many are in their 4th concurrent year of supply deficit (The Silver Institute, 2024).

investments of $1.5 Billion, all of this is directed to non-ferrite minerals and neodymium materials only useful in battery storage, not energy production technology such as PV panels or wind turbines. I believe that it is more important for funding to be allocated to more essential minerals, as many are in their 4th concurrent year of supply deficit (The Silver Institute, 2024).

Rectifying the Problems

To rectify some of these issues, what the government could have done is place more emphasis on our current commodities exports such as iron, silver and copper to help reduce costs if the Labor Government undertakes a full green transition over the next 30 years. Current and future shortages are going to increase prices further which will be reflected in both discretionary and non-discretionary spending as well as in the public sector (infrastructure, transport, networks) unless greater revisions are made in the 25-26 budget.

Additionally, the government could have cut spending further to reduce further inflationary pressures instead of injecting spending directly, and cutting taxes encouraging consumer spending. With the additional funds the government could service it’s current and non-current debt obligations reducing the impacts of future budget deficits.

Fiscal Report Summary

Overall, it is acknowledged that this 2024 Federal Budget has been delivered as a surplus, which has been designed to fight inflation, while attempting to deal with the cost of living crisis. Although many parties and lobbies such as the LPA, The Greens, The Nationals and organizations such as Vinnies Australia state that this federal government has done nothing to help the unemployed, the homeless and those critically in needs of support.

It is also stated that the large swathes of government spending will only worsen inflation and may result in raising interest rates by the RBA. Although controversial, the Labor government has released a somewhat effective election budget for 2025, but with lots of criticism to follow it from all other parties.

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