Welcome to the Fear and Greed Business Interview. I'm Sean Aylmer. Last night, Treasurer Jim Chalmers delivered his fourth federal budget, a budget the government hadn't really intended to deliver until ex tropical Cyclone Alfred delayed plans to call an election. It was a budget very light on reform, with the biggest surprise being fairly small tax cuts for all taxpayers over the next couple of years. It also confirmed a decade of deficits ahead, but a better than expected outlook for economic growth. As the Treasurer acclaimed in Parliament House last night, Australia's economy is turning a corner, just as the global economy is deteriorating. Every year we get the best budget and analysis from Fearing Greed's resident economist, Stephen Koukoulas aka The Kouk. You'll hear him every Monday on our podcast The Week Ahead. He's the managing director of Market Economics and a former economic advisor to a Prime minister. Stephen, Welcome to Fear and Greed. Which is a bit ridiculous saying that to you, Stephen, because you just part of the furniture.

Welcome to the Fear and Greed Business Interview. I'm Sean Aylmer. Last night, Treasurer Jim Chalmers delivered his fourth federal budget, a budget the government hadn't really intended to deliver until ex tropical Cyclone Alfred delayed plans to call an election. It was a budget very light on reform, with the biggest surprise being fairly small tax cuts for all taxpayers over the next couple of years. It also confirmed a decade of deficits ahead, but a better than expected outlook for economic growth. As the Treasurer acclaimed in Parliament House last night, Australia's economy is turning a corner, just as the global economy is deteriorating. Every year we get the best budget and analysis from Fearing Greed's resident economist, Stephen Koukoulas aka The Kouk. You'll hear him every Monday on our podcast The Week Ahead. He's the managing director of Market Economics and a former economic advisor to a Prime minister. Stephen, Welcome to Fear and Greed. Which is a bit ridiculous saying that to you, Stephen, because you just part of the furniture.

Yeah, indeed, but good to be here and good to sort of have a bit of a chat about the budget, because it was a document that sort of didn't set the world on five, but it was one of those ones where if you sort of sit back and just look at the bottom line numbers and some of the policy issues in there, yeah, it's okay, it's actually not too bad.

Yeah, indeed, but good to be here and good to sort of have a bit of a chat about the budget, because it was a document that sort of didn't set the world on five, but it was one of those ones where if you sort of sit back and just look at the bottom line numbers and some of the policy issues in there, yeah, it's okay, it's actually not too bad.

So let's look at some of the surprises last night, particularly the tax cuts. Fairly small are they meaningful?

So let's look at some of the surprises last night, particularly the tax cuts. Fairly small are they meaningful?

Look, they were a surprise. I don't think anybody had heard of for got wind of the fact that they were going to be raising that or sorry, lowering the tax threshold on the lowest bracket from sixteen cents to fourteen cents over a couple of years. They're not big bickis and not big dollars savings once they take effect from the middle of next year. In the middle of the year after that, I think it in total, someone will be a tax paybably saving about fifteen to twenty dollars a week. So in the scheme of where we're going to be in the economy in a year or two's time, it's not a huge amount of money. But it's one of those ones that if we had tax bracket indexation, which a lot of people talk about. It's probably the extent of the vexation that we'd probably see if we had that. So look, it's just something there. It's a little sweet, and I think it's probably more to do with something else for the government to talk about as the election campaign starts to heat up and we get very close to election day. It's not a bad thing. It's not the sort of thing either that's going to blow inflation out of the water because it's such a big tax cut. But it's not the sort of thing either that's going to be sort of celebrated by everyone that that's, oh wow, this is a game changer. But having said all that, I prefer lower taxes than the higher taxes, so I'll take every little bit that I can get.

Look, they were a surprise. I don't think anybody had heard of for got wind of the fact that they were going to be raising that or sorry, lowering the tax threshold on the lowest bracket from sixteen cents to fourteen cents over a couple of years. They're not big bickis and not big dollars savings once they take effect from the middle of next year. In the middle of the year after that, I think it in total, someone will be a tax paybably saving about fifteen to twenty dollars a week. So in the scheme of where we're going to be in the economy in a year or two's time, it's not a huge amount of money. But it's one of those ones that if we had tax bracket indexation, which a lot of people talk about. It's probably the extent of the vexation that we'd probably see if we had that. So look, it's just something there. It's a little sweet, and I think it's probably more to do with something else for the government to talk about as the election campaign starts to heat up and we get very close to election day. It's not a bad thing. It's not the sort of thing either that's going to blow inflation out of the water because it's such a big tax cut. But it's not the sort of thing either that's going to be sort of celebrated by everyone that that's, oh wow, this is a game changer. But having said all that, I prefer lower taxes than the higher taxes, so I'll take every little bit that I can get.

What about the healthcare changes, so the hopefully there's more money for GPS, hopefully meaning more bulk billing for people, the cost of a script will fall. All cost of living measures really all.

What about the healthcare changes, so the hopefully there's more money for GPS, hopefully meaning more bulk billing for people, the cost of a script will fall. All cost of living measures really all.

Cost of living measures, and again they're the sort of items that a lot of people avoid going to the doctor or they avoid getting their scripts filled because they do just cost that large amount of money. And when you're really on the edge of your financial status and you're feeling a bit crawk or do you I've got this scriptive film that it's going to cost me thirty five bucks or whatever it is, and it's down to twenty five dollars. Great, So again something that we're announced pre budget. Actually, this is one of the things about the budget in general, and are you alluded to in the intro Seawan that it was a budget that they didn't really think that they would deliver, so that it's a lot of stuff that they just sort of packaged together in the budget. So these health reforms, they're useful. Again, they're certainly helpful for again the marginal individual out there in terms of their GP visits and bulk billing rates and the prescription costs. Again they're just a few bucks here, a few bucks there. But in a sense, once you add up all these things and you're throwing things like childcare and whatnot, you know there's some pretty decent sort of cost of living relief measures there.

Cost of living measures, and again they're the sort of items that a lot of people avoid going to the doctor or they avoid getting their scripts filled because they do just cost that large amount of money. And when you're really on the edge of your financial status and you're feeling a bit crawk or do you I've got this scriptive film that it's going to cost me thirty five bucks or whatever it is, and it's down to twenty five dollars. Great, So again something that we're announced pre budget. Actually, this is one of the things about the budget in general, and are you alluded to in the intro Seawan that it was a budget that they didn't really think that they would deliver, so that it's a lot of stuff that they just sort of packaged together in the budget. So these health reforms, they're useful. Again, they're certainly helpful for again the marginal individual out there in terms of their GP visits and bulk billing rates and the prescription costs. Again they're just a few bucks here, a few bucks there. But in a sense, once you add up all these things and you're throwing things like childcare and whatnot, you know there's some pretty decent sort of cost of living relief measures there.

Okay, what about the deficit forecast? So forty two point one billion next financial year, coming in over twenty seven billion this financial year. Should we be worried about those things.

Okay, what about the deficit forecast? So forty two point one billion next financial year, coming in over twenty seven billion this financial year. Should we be worried about those things.

I'm I would like to see smaller deficits at this stage of the business cycle, and particularly as the treasure is forecasting stronger economic growth. I think once we get out into financially twenty six to twenty seven, so a couple of years from now, and so two and a half two and three quarter GDP growth, with inflation at two and a half, with the unemployment rates still at four and a quarter percent, you would probably think the budget deficits may be a little bit smaller. But again in the scheme of things, and given the size of the Australian economy now we're close to a three trillion dollars per auntum economy budget spending an outlayser eight hundred billion dollars per auntum, so small forecasting eras can have a very big effect on the budget bottom line. There's not an excuse to say that the budget deficits don't matter. But when the economy is improving, and maybe this is for the post election budget, whoever wins the election might just sort of deliver a few nasties to sort of get that structural balance of the budget in better shape. But again we've only got budget deficits. They're only about one point two one point three percent of GDP. They're the sort of numbers that certainly haven't spooked the markets. And just as I was looking last night at the initial money market reactions to it, it was a big yawn. They didn't even move the dollar, the bond yields or anything even response to these tax cuts and other measures that were there. But you know, the US is going through agony right now trying to get their budget deficit down from six percent of GDP. You know, the dose tax cuts and other spending cuts that mister Musk is implementing, is struggling to get their budget deficit to anywhere near ours. Is so again, I think we just need to sort of take a step back. You know what, do we want this budget to deliver or any budget deliver bit from any treasure. And at the end of the day, if the economy is growing, you know, small budget deficit, there's a little bit of cost of relief. It's not the worst thing that we've seen.

I'm I would like to see smaller deficits at this stage of the business cycle, and particularly as the treasure is forecasting stronger economic growth. I think once we get out into financially twenty six to twenty seven, so a couple of years from now, and so two and a half two and three quarter GDP growth, with inflation at two and a half, with the unemployment rates still at four and a quarter percent, you would probably think the budget deficits may be a little bit smaller. But again in the scheme of things, and given the size of the Australian economy now we're close to a three trillion dollars per auntum economy budget spending an outlayser eight hundred billion dollars per auntum, so small forecasting eras can have a very big effect on the budget bottom line. There's not an excuse to say that the budget deficits don't matter. But when the economy is improving, and maybe this is for the post election budget, whoever wins the election might just sort of deliver a few nasties to sort of get that structural balance of the budget in better shape. But again we've only got budget deficits. They're only about one point two one point three percent of GDP. They're the sort of numbers that certainly haven't spooked the markets. And just as I was looking last night at the initial money market reactions to it, it was a big yawn. They didn't even move the dollar, the bond yields or anything even response to these tax cuts and other measures that were there. But you know, the US is going through agony right now trying to get their budget deficit down from six percent of GDP. You know, the dose tax cuts and other spending cuts that mister Musk is implementing, is struggling to get their budget deficit to anywhere near ours. Is so again, I think we just need to sort of take a step back. You know what, do we want this budget to deliver or any budget deliver bit from any treasure. And at the end of the day, if the economy is growing, you know, small budget deficit, there's a little bit of cost of relief. It's not the worst thing that we've seen.

Stay with me, Steve, and we'll be back in a minute. I guess this morning is economist Stephen could call us before we went to the break you kind of wrapped up the budget and there's a bit of cost of living relief and mean around the edges. Should budgets be more reform documents?

Stay with me, Steve, and we'll be back in a minute. I guess this morning is economist Stephen could call us before we went to the break you kind of wrapped up the budget and there's a bit of cost of living relief and mean around the edges. Should budgets be more reform documents?

I think back in the day, and look at my gray hair tells me I've used to be involved in the budget writing process many many moons ago and back in the day. If I can tease that praising before everybody says, okay, Boomer, you know, tell us your old more stories. But yeah, back in the day, they were bigger reforming documents. So I think in the era where there wasn't the twenty four hour news cycle and these sorts of things, when the budget came along, everyone was there anxiously seeing what was in there. Hence we had the lock ups and there would be many, many different headlines that came of it. Nowadays we just touched on Sean, the treasure and the govern It's announced a lot of the things that were sort of packaged up in the budget well before budget night. We don't need to wait to list budget night for policy decisions to be announced. If you've got a good idea on the housing side, on childcare, on pharmaceutical payments, announce them when you've got them ready, And of course with the budget it's at of more I think an accounting document, so you bring together all the costs and changes to parameters and the tax receipts and these sort of things. And that's a really important part of budgeting. By definition, what is the accounting mechanism? How big is the surplace or the deficit? What is happening to government that how many bonds will the government need to issue to cover the budget deficit this year? And that's all really really important stuff. But in terms of the policy reform, if you've got a good idea in government, announce it today tomorrow, don't wait for the budget to do it, because people are hungry for economic news and economic policy change as well. So I think the budget's losing a lot or has lost a lot of it's us. It's just not that sort of wow sort of document that it used to be.

I think back in the day, and look at my gray hair tells me I've used to be involved in the budget writing process many many moons ago and back in the day. If I can tease that praising before everybody says, okay, Boomer, you know, tell us your old more stories. But yeah, back in the day, they were bigger reforming documents. So I think in the era where there wasn't the twenty four hour news cycle and these sorts of things, when the budget came along, everyone was there anxiously seeing what was in there. Hence we had the lock ups and there would be many, many different headlines that came of it. Nowadays we just touched on Sean, the treasure and the govern It's announced a lot of the things that were sort of packaged up in the budget well before budget night. We don't need to wait to list budget night for policy decisions to be announced. If you've got a good idea on the housing side, on childcare, on pharmaceutical payments, announce them when you've got them ready, And of course with the budget it's at of more I think an accounting document, so you bring together all the costs and changes to parameters and the tax receipts and these sort of things. And that's a really important part of budgeting. By definition, what is the accounting mechanism? How big is the surplace or the deficit? What is happening to government that how many bonds will the government need to issue to cover the budget deficit this year? And that's all really really important stuff. But in terms of the policy reform, if you've got a good idea in government, announce it today tomorrow, don't wait for the budget to do it, because people are hungry for economic news and economic policy change as well. So I think the budget's losing a lot or has lost a lot of it's us. It's just not that sort of wow sort of document that it used to be.

What about it In terms of this budget as a pre election budget, it is obviously a pre election budget because we have tap on by the middle of May, in election by the middle of May. How is it if we want to rate it? In terms of that, there's always a temptation for government to go big ahead of the election. They didn't totally do that last night.

What about it In terms of this budget as a pre election budget, it is obviously a pre election budget because we have tap on by the middle of May, in election by the middle of May. How is it if we want to rate it? In terms of that, there's always a temptation for government to go big ahead of the election. They didn't totally do that last night.

No, they didn't. Apart from the income tax cuss, which again we said, we're not huge in the scheme of throwing money around, if you like, but building on some of the other measures that have been announced previously, including the extension of electricity subsidies from other two corps and these sorts of things, there are things out there which are appealing but don't necessarily blow the budget out of the war. And again I mentioned the money market reaction to the budget because again as we saw with various examples, I think back to Liz trust in the UK a couple of years ago when she announced a whole lot of radical reforms. The market's absolutely tanked the budget coming out. And as I look at the markets on yields might be up or down a tick or two, and the Aussie dollars sort of barely moved, and they're actually actually reacting more to the US economic used than our own budget. So that says to me that whatever the pre election posturing, if you like, of the government when it framed its budget, it's not the sort of thing that's going to first of all, scare too many vaders but it's not necessarily the think that people can say to you, I'm going to get ahole lot of cash in my pockets or I might vote for you. So again, and that's where the treasure has tried to come out. I listened to him last night and sort of taking so, Look, it's a prudent, responsible budget and look it broadly? Is it broadly is? And as an economist, yes, I'd love to see more reform. But you know, I'd also like to open the batting for Australia and I'm not going to get that either.

No, they didn't. Apart from the income tax cuss, which again we said, we're not huge in the scheme of throwing money around, if you like, but building on some of the other measures that have been announced previously, including the extension of electricity subsidies from other two corps and these sorts of things, there are things out there which are appealing but don't necessarily blow the budget out of the war. And again I mentioned the money market reaction to the budget because again as we saw with various examples, I think back to Liz trust in the UK a couple of years ago when she announced a whole lot of radical reforms. The market's absolutely tanked the budget coming out. And as I look at the markets on yields might be up or down a tick or two, and the Aussie dollars sort of barely moved, and they're actually actually reacting more to the US economic used than our own budget. So that says to me that whatever the pre election posturing, if you like, of the government when it framed its budget, it's not the sort of thing that's going to first of all, scare too many vaders but it's not necessarily the think that people can say to you, I'm going to get ahole lot of cash in my pockets or I might vote for you. So again, and that's where the treasure has tried to come out. I listened to him last night and sort of taking so, Look, it's a prudent, responsible budget and look it broadly? Is it broadly is? And as an economist, yes, I'd love to see more reform. But you know, I'd also like to open the batting for Australia and I'm not going to get that either.

Very quickly, Peter Dutton speaks on Thursday night, his reply, his budget reply. It's an opportunity for him to have a set piece. Even if the general population doesn't necessarily watch him, certainly the media watches him. Is he likely to say anything particularly around reform, around change or do you think he'll play a pretty straight back too.

Very quickly, Peter Dutton speaks on Thursday night, his reply, his budget reply. It's an opportunity for him to have a set piece. Even if the general population doesn't necessarily watch him, certainly the media watches him. Is he likely to say anything particularly around reform, around change or do you think he'll play a pretty straight back too.

Look, it's a great opportunity for him, and I love politics and I love the hustle and bustle of the political debate. So I'm really hoping that he does come out with the Coalition's alternative policy, because that's what it's about. They're all copying each other then it's a bit of a yawn fest in a sense. So if I was Peter Dutton or advising him, I'd say, look again, without super radical policies or something that's going to scare the horses, so to speak, it's a great chance for him to put a little bit of flesh on a couple of alternative policies. I don't know what they're going to be, but here's a chance for him to sort of set the groundwork for the election campaign. Maybe he does something a little bit different on the income tax scales. We know they've got a different strategy on renewable energy and these sorts of things. That's fine, and that's important, and that's what we can have a debate about when the election campaigning hots up. But it is a chance for him to say, well, yeah, we would target a smaller budget, definitely want to serve and this is how we go to achieve it. I think it's how we achieve it that he's got to put a bit of a flesh on the bone. And so I'm look, I'll be watching it one of these suckers who will watch it, and I just hope that it's a really it's an enlightening delivery that just sort of lifts the whole economic debate because the Australian economy is pretty good but like my old school reports, could be doing better.

Look, it's a great opportunity for him, and I love politics and I love the hustle and bustle of the political debate. So I'm really hoping that he does come out with the Coalition's alternative policy, because that's what it's about. They're all copying each other then it's a bit of a yawn fest in a sense. So if I was Peter Dutton or advising him, I'd say, look again, without super radical policies or something that's going to scare the horses, so to speak, it's a great chance for him to put a little bit of flesh on a couple of alternative policies. I don't know what they're going to be, but here's a chance for him to sort of set the groundwork for the election campaign. Maybe he does something a little bit different on the income tax scales. We know they've got a different strategy on renewable energy and these sorts of things. That's fine, and that's important, and that's what we can have a debate about when the election campaigning hots up. But it is a chance for him to say, well, yeah, we would target a smaller budget, definitely want to serve and this is how we go to achieve it. I think it's how we achieve it that he's got to put a bit of a flesh on the bone. And so I'm look, I'll be watching it one of these suckers who will watch it, and I just hope that it's a really it's an enlightening delivery that just sort of lifts the whole economic debate because the Australian economy is pretty good but like my old school reports, could be doing better.

Always, Stephen, thank you for talking to Fear and Greed. Thanks Sean, Stephen coodcurlas aka the Cook. He's the managing director of Market Economics. You'll find him at the Cook dot com, t h e k O UK, thekouk.com or on X using the handle @TheKouk. This is the Fear and Greed Business Interview. Join us every morning for the full episode of Fear and Greed. Daily business news for people who make their own decisions. I'm Sean Aylmer. Enjoy your day.

Always, Stephen, thank you for talking to Fear and Greed. Thanks Sean, Stephen coodcurlas aka the Cook. He's the managing director of Market Economics. You'll find him at the Cook dot com, t h e k O UK, thekouk.com or on X using the handle @TheKouk. This is the Fear and Greed Business Interview. Join us every morning for the full episode of Fear and Greed. Daily business news for people who make their own decisions. I'm Sean Aylmer. Enjoy your day.