As Treasurer Jim Chalmers prepares to deliver his fourth budget, the tension between economic stewardship and political survival is on full display. What should be a moment to lock in Australia’s fiscal resilience is instead a high-wire act: balancing cost-of-living relief, global uncertainty, and a looming federal election.
This is not the kind of budget a government typically delivers months out from a national poll. After two consecutive surpluses, the budget will fall back into deficit – a shift that hands the opposition a ready-made line of attack: “Labor had the wind at their back and still ended up in the red.”
To blunt that message, the government is rolling out a series of voter-friendly measures. The headline announcement? A $150 extension of the energy bill rebate for all households and small businesses – part of a $1.8 billion spend designed to ease household cost-of-living pressures.
Framed as responsible relief, the package continues Labor’s pattern of targeted subsidies and short-term support. But there’s growing criticism that these handouts, while politically popular, do little to address structural issues – and may in fact worsen them. As AFR editor-at-large Michael Stutchbury put it, this is a government that “treats voters like mugs” with short-term cash splashes while ignoring long-term fiscal consequences. The promised $275 cut to household power bills from 2022 remains unmet, and this rebate looks more like a political bandaid than an economic fix.
To complicate matters, Australia’s fiscal position is increasingly shaped by what isn’t in the budget. A growing list of “off-budget” items – including subsidised loans, equity stakes and defence projects – has led economists to describe the federal budget as a “debt-creation machine.” The official deficit may be around $20 billion, but the real figure – when off-budget items are accounted for – could be nearly double.
In this environment, it’s no surprise that both major parties are leaning heavily on narrative. For Labor, the narrative is one of steady hands in turbulent times: falling inflation, rising wages, and a government investing in resilience through its Future Made in Australia strategy. Treasurer Chalmers is pointing the finger at Donald Trump’s return, global trade disruptions, and rising geopolitical risk as justification for continued deficits and domestic investment.
But the Coalition isn’t buying it. Peter Dutton and Angus Taylor are dialling up attacks on Labor’s spending, warning of structural deficits, bracket creep, and a bloated public sector. Yet the Coalition’s economic message has struggled for consistency – often drowned out by cultural flashpoints like work-from-home crackdowns and citizenship test proposals. Additionally, Dutton’s ability to attack Chalmers’ spending excess is diminished by fact that he’s immediately matched Labor’s big-ticket Medicare and pharmaceuticals changes – with price tags of $8.5 billion and $700 million respectively.
That political confusion has real consequences. Voters want relief, yes – but they also want credibility. And recent polling suggests they’re still undecided on who can offer both. Albanese’s approval has improved. Dutton’s has dipped. But on a two-party-preferred basis, the race remains neck and neck.
Perhaps most revealing is how both sides are treating the budget less as an economic statement and more as a campaign platform. There’s increasing talk of the budget being “phase one” of Labor’s re-election pitch – with the big-ticket structural reforms (and potentially more spending) saved for the campaign proper. The Coalition, meanwhile, is sharpening its attack lines for budget reply – focused less on alternative policy than on Labor’s perceived economic mismanagement.
In the middle of it all, Australian voters are caught in a now-familiar pattern: short-term relief, long-term uncertainty. Many, including economist Steven Hamilton, see energy bill rebates as inflationary – helpful in the moment, but ultimately adding to the problem they’re meant to solve. In the longer term, government spending of this nature often becomes a cycle of tax, churn, and diminishing returns.
So where does that leave us?
This year’s budget may offer some help to families struggling under cost-of-living pressure. It may also reinforce Labor’s economic narrative of calm, responsible leadership in a chaotic global environment. But it will do so at the cost of long-term clarity. Deficits will continue. Off-budget spending will rise. And the pressure to explain – and eventually pay for – these decisions will fall to future governments, and future voters.
In short, we are heading into another election where both major parties will compete not just on vision, but on whose version of reality voters are willing to believe. Tuesday’s budget will tell us which version Labor wants to sell. But the bigger question is whether voters are still buying.
Cookie Policy