Australia’s Budget was presented this week, and there is plenty to make New Zealanders envious. From an Australian, perspective, though, many of the problems are similar.
The Labor Government there is proclaiming a focus on the cost of living. It also endeavours to walk the tightrope between providing "relief" and not stimulating inflation.
New Zealand’s Budget is just under a fortnight away. Finance Minister Nicola Willis would have looked across the Tasman and wished she had at least Labor’s wriggle room.
She is being squeezed by inherited deficits as well as falling income as the economy suffers in the battle against the scourge of inflation. She is also committed to areas of higher spending.
Tax cuts were "promised" before the last election and that is what must be delivered politically, even if they are not economically the best course.
Australia’s Labor Government, thanks in part to higher-than-predicted income from an economy close to capacity and boosts from its mineral wealth, especially strong iron ore prices, can spend more.
Included in its Budget are $A300 power rebate bills per household, not means-tested. That per week is not much, but it comes alongside tweaks to the long-awaited stage three of Australia’s tax cuts. These were announced earlier and are included in the Budget. Additional money goes to lower- and middle-income earners and higher earners will pay more.
Housing pressure is severe in parts of Australia. Prices in Sydney top those in Auckland. Home buyers also face "stamp duties". The Budget gives money to states to build and fix social housing.
Universities have been told they must cap overseas student numbers unless they build more housing for them. That is because of the extra strain on accommodation their presence creates in Australia’s largest cities.
Other Budget announcements remind us that not everyone in Australia is better off. Alterations to pension calculations show that age pensions are means-tested. A new way to index student loans illustrates a different picture to the interest-free loans in New Zealand.
Future Made in Australia has $A22.7 billion to spend over the next several years to boost high-end and green manufacturing, just over half in production tax incentives for renewable hydrogen and "critical" minerals. Australia — like the United States, China, Japan, Korea and the European Union — has signalled it wants to charge ahead to become a superpower in green hydrogen.
Defence costs are set for steady increases and a rise in its share of the country’s gross domestic product.
Despite the extra spending, Australia’s Budget is in surplus again. Expenditure further out, however, predicts a return to deficits. Australian economists, in another New Zealand parallel, are concerned about long-term "structural deficits". The case is that the Budget tinkers and spends but fails to tackle underlying issues. Sound familiar?
Labor is finely balanced in polls with the opposition Coalition, and a federal election is due by May next year. Labor, despite spending with an election in mind, was in danger of not doing enough to satisfy numerous needs. At the same time, Labor has been accused of providing sufficient stimulus to keep interest rates higher for longer.
Labor will be desperate that it has the balance about right and that sticky inflation will drift back to acceptable levels.
While Ms Willis faces many of the same challenges hers are more acute. The slowdown in the New Zealand economy gives the Government far less to spend.
