2024 Federal Budget Breakfast reveals concerns over Australia’s ‘buy now, pay later’ budget 

Treasurer Jim Chalmers’s Future Made in Australia federal budget handed down on 14 May left many wondering at the Institute of Public Accountants (IPA) annual Budget Breakfast at Parliament House in Canberra whether Australia had a future, fearing a short-term focus on cost-of-living measures came at the expense of a longer-term vision to set business and the country up for success. 

Critical minerals, quantum and solar producers the winners 

There was very little for small businesses unless they were building a quantum computer, producing solar panels or green hydrogen, or “sitting on some lithium, cobalt, nickel, silicon”, host and broadcaster Emma Alberici told the IPA event, held in conjunction with the Canberra Business Chamber on 15 May. Local producers faced competition from China that produced 90% of the world’s solar panels “for next to nothing”. “It’s hard to see how Australia is going to get there unless there are some specific measures of course to improve the working lives of small business,” she said.

“This does have the tinge of a mostly political budget,” Alberici said. “When it comes to the bigger economic picture…the forecasts in this budget do seem a little bit heroic.” According to Treasury, inflation will return to the Reserve Bank of Australia’s (RBA) 2% to 3% tolerance by the end of this year. “That's in stark contrast to the Reserve Bank's own forecast, which says inflation isn't likely to hit that point until 2026,” she said. 

Alberici told the audience that relief for small businesses would come from the stage three personal income tax cuts, the $325 energy bill rebates and an extension by 12 months of the $20,000 instant asset write off measure. She said it was the “last budget before the next election, which must be held by May next year” and had a “tinge” of being a “political budget”. 

Dr Andrew Leigh, Assistant Minister for Competition, Charities, Treasury and Employment and Federal Member for Fenner, spoke about balancing immediate cost-of-living pressures with the need to invest in Australia’s future, while Deputy Opposition Leader Sussan Ley expressed concern about the looming budget deficits the country faces. A panel session followed with Independent Senator David Pocock and Australian Financial Review political correspondent Tom McIlroy who dissected the budget announcements and the implications for households, businesses and Australia, against the backdrop of rising costs, slowing productivity, declining growth and inflationary pressures. 

Leigh says budget balancing cost-of-living pressure with shaping Australia’s future

During his seventh address at the Budget Breakfast, Dr Leigh said it was an “opportunity to consider Australia's place in the world…and whether we're making the right tools to shape a fairer society and a stronger economy.” Using Halley’s Comet as a historical marker to demonstrate the progress since it lit up the skies in 1986, he said that ‘budgets take their place in the long arc of history’ and in the geostrategic decisions that shape our future. 

Ongoing conflicts in Ukraine and the Middle East combined with a slowdown in China’s economic growth continued to test the global economy’s resilience, and the net zero transition required “massive global investment” in renewable energy technologies. Against an international context, Australia’s economic conditions and jobs market were strong.

He said the budget provided cost-of-living relief, productivity drivers and a focus on gender equity. Cost-of-living policies would “take another three quarters of a percentage point off inflation this year, and half a percentage point next year”. Dr Leigh insisted the tax cuts would not boost inflation by increasing employment and offsetting the impact of spending. 

The government was abolishing “nuisance tariffs”, reducing compliance for business, positioning Australia as a renewable energy superpower, making the country’s public sector more productive and closing the gender pay gap. “A more dynamic economy means better prices, higher wages and more innovation,” he said. “We are encouraging more private investment in skills and supply chains, and also investing in people by setting a target of 80% of Australians to have a tertiary qualification by 2050.”

“Since coming to office, we've mandated gender pay gap reporting in large firms and funded pay rises in female-dominated occupations such as aged care. The gender pay gap is now lower than it's ever been.”

Structural change squandered in favour of ‘buy now, pay later budget’: Ley 

Ley accused the government of failing to “make the hard decisions” and instead faced “going backwards”. “Australians needed a budget that restored our standard of living by addressing the source of our inflation pressures, restoring prosperity, and creating opportunity with real support for small businesses and a proper plan,” she said. 

The opportunity was squandered to restore public budget discipline and honesty by “restraining spending, bringing back the fiscal guardrails tax to GDP cap and delivering structural surplus or windfall surplus. Labor's third budget has failed all these tests.”

“Instead, as you can see…Australia has got a buy now pay later budget” that failed to introduce the structural change needed to restore standards of living.”

She said the budget introduced $30,000 of extra spending for every Australian household amid unrestrained migration and spiralling home mortgages. “The centrepiece of the budget is a future made in Australia that started on a bumper sticker. And of course, we all support Australian manufacturing. But behind the slogan there are serious questions about whether this is an efficient use of taxpayer funds that will drive productivity and address inflation.”

It was a “bold choice” to use manufacturing as a centrepiece of the budget given this was already promised as part of the National Reconstruction Fund during the last election, an initiative which was “inaccessible for everyday manufacturers trying to keep their lights on for another year.” Ley said manufacturing insolvency has tripled as businesses grappled with unaffordable energy costs.

She called for greater accountability and questioned the wisdom of the government’s $940 million investment in PsiQuantum, the Silicon Valley quantum computing group, and criticised the failure to build the country’s satellite sovereign capabilities. Ley also supported the instant asset write off extension by 12 months, but believed the threshold should be higher.

Budget ‘sprinkled’ handouts instead of tackling root cause: Pocock

Pocock believed there was “huge opportunity” to provide small business with more certainty.  The government had instead “sprinkled things around to give everyone a little bit but I don't see it tackling the root causes” of the challenges the sector faces. He described the budget as “tragically short-sighted” and lacking in long-term thinking.

“I would love to have seen more longer term thinking if you look at the way that energy and energy bills are driving inflation.,” he said. “Let's tackle some of the root causes that we have, with an opportunity to electrify to invest in renewables, rather than some plan for nuclear in a decade or two, which we know is more expensive.”

McIlroy queried why the instant asset write off initiative was not made permanent and encouraged more certainty over tax rules. Ahead of the Productivity Commission’s report on early childhood education and care expected on 30 June, he said the government needed “to pull different levers” to support productivity growth. He believed it was politically risky to bet on inflation coming down to the target range at a time when interest rates had not eased as expected.

Pocock called for greater accountability to ensure sovereign Australian businesses had a better chance when it comes to our procurement system. The panel examined the need for improved transparency in relation to government grants awarded to businesses that were not competitive. 

A study from the IPA-Deakin SME Research Centre published earlier this year found that the vast majority of Commonwealth Government grants awarded to businesses between 2018-2022 were non-competitive. Only 17% of the $3 billion in business grants awarded over the five-year period were competitive. See the whitepaper.