Top economists give budget modest rating and doubt inflation will fall as planned
- Written by: Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University
Asked to grade Treasurer Jim Chalmers’ third budget on his own criteria of delivering on “inflation in the near term and then growth in the medium term[1]”, most of the 49 leading economists surveyed by the Economic Society of Australia and The Conversation have failed to give it top marks.
On a grading scale of A to F, 17 of the 49 economists – about one-third – give the budget an A or a B. Two have declined to offer a grade.
The result is a sharp comedown from Chalmers’ second budget in 2023. Two-thirds[2] of the economists surveyed conferred an A or a B on that budget.
The economists chosen to take part in the post-budget Economic Society surveys are recognised by their peers as leaders in fields including macroeconomics, economic modelling, housing and budget policy.
Among them are a former head of the Department of Finance, a former Reserve Bank board member and former Treasury, International Monetary Fund and Organisation for Economic Co-operation and Development officials.
Thirteen of those surveyed – more than a quarter – give the budget a low mark of D or an E. None have given it the lowest possible mark of F.
Frank Jotzo: crunch time for tax.
AAP[14]
Australian National University economist Frank Jotzo said crunch time for tax reform was coming, given the large baked-in increases in spending on defence, health and disability insurance and Australia’s over-reliance on income tax and company tax.
McKibbin said Australia’s main economic problems were its lack of productivity growth, the big changes needed to bring about the energy transition, the surge in artificial intelligence, the risk of much lower export prices and global geopolitical uncertainty.
The government should have tried to build a bipartisan consensus about how to fix these.
Private investors were hanging back knowing that whatever the government did could be reversed at the next election.
Although many of those surveyed welcomed the Future Made in Australia Act[15], some criticised its approach of “picking winners” and “wasting precious resources” by putting money into activities such as the manufacture of solar panels, which could be done more cheaply elsewhere.
Bigger government
Former Industry Department chief economist Mark Cully said it was in some ways one of the most consequential budgets in years.
It locked in a clear shift towards higher spending and revenue, which, at around 26% of GDP, was higher than any other time Australia had been near full employment.
Future Made in Australia was the most marked intervention by a government in shaping the future direction of the economy for decades.
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References^ inflation in the near term and then growth in the medium term (ministers.treasury.gov.au)^ Two-thirds (theconversation.com)^ perhaps even by the end of this year (ministers.treasury.gov.au)^ 2.75% (images.theconversation.com)^ bank’s forecast (www.rba.gov.au)^ energy bill relief (images.theconversation.com)^ Commonwealth Rent Assistance (images.theconversation.com)^ between 2% and 3% (images.theconversation.com)^ $107.2 billion (www.pbo.gov.au)^ reskew (theconversation.com)^ special top-up for Western Australia (theconversation.com)^ $8.9 billion (taxpolicy.crawford.anu.edu.au)^ decades to come (ministers.treasury.gov.au)^ AAP (photos.aap.com.au)^ Future Made in Australia Act (budget.gov.au)
