Kelly Eckhold: Westpac Chief Economist on Australia's new federal budget

The Australian Government has unveiled its Budget, with the Iran war continuing to loom large. 

Gross debt is expected to hit $1 trillion for the first time this year, and the federal government isn't expected to be back in surplus until 2036. 

The Australian Treasury is forecasting inflation will peak about 5%. 

Treasurer Jim Chalmers says they're dealing with the fifth economic shock in less than 20 years. 

Westpac Chief Economist Kelly Eckhold told Ryan Bridge that all the new measures the Budget introduces are backloaded, so they might be spending a bit of money now, and might not get the savings later. 

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Episode Transcript

Speaker 1 (00:00):
Jim Chalmer's fifth budget across the ditch, seventy seven billion
dollars in net new taxes. Deficit stays by the way
until twenty thirty five.

Speaker 2 (00:08):
This is the most important and ambitious budget in decades.
Important because the world is throwing a lot of us
and this budget is about helping Australia deal with those challenges.
And ambitious because we have so much going for us
and this budget is about Australia seizing those opportunities.

Speaker 1 (00:26):
You're Rossie Batler's your work is five dollars a week
tax cut for you, negative gearing, capital gains, tax breaks
scaled back for your investors and property owners. Kelly, you're
Cold Westpac chief economist with US Line this morning. Kelly,
good morning, Good morning.

Speaker 3 (00:40):
Your thoughts well, I mean, I think for the financial
markets this was a bit of a wash because probably
the amount of debt hitting the market is not very
much different than they expected. But it certainly is a
reasonably expansionary budget on net. And if I look at
what Lucy Ellis, my boss in Australia saying, is this

(01:01):
issue of a bit of a tailor two horizons there
where I mean at the starting point for that Aussie economy,
it's been doing well. That's why the RBA has been
tightening this year, so the government's seen a bit of
revenue from that, so that's good, But then they are
spending more money and all of the savings measures that
are designed to pay for all of this are backloaded
because it's going to take a week while before things

(01:24):
like capital gains taxes, etc. Start to add to the coffers.
So there's quite a lot of risky, particularly since most
of those initiatives have to go through legislation. And my
understanding is that some of those oppositions, some of those
other coalition parties, are not supporting some of these things,
So they might be spending a bit of money now,
but they might not get the savings later.

Speaker 1 (01:45):
Plus you've got the thirty six billion I think they
want to cut from the disability insurance scheme. All these things,
as you say, are going to take time to happen
and are not even guaranteed to happen.

Speaker 3 (01:55):
That was my point. Yeah, particularly on that the savings scheme.
I mean, I think it's their equivalent basic seed, and
know how challenging it is to start cutting that. The
other thing I'll say is that the assumptions, the economic
assumptions are here are quite a bit more rosy than
my colleagues in Australia have in terms of, for example,
where unemployment's going to peak, they say it's only going
to peak at four and a half percent. I would

(02:17):
have thought that's pretty fanciful in the current environment.

Speaker 1 (02:21):
Kelly are called a book very quickly before you go property.
They are, you know, scaling back negative gearing that are
doing the tax changes to property investors, and yet the
Treasury's own estimates say it's going to result in fewer
houses being built there.

Speaker 3 (02:38):
Yeah, well, I guess everybody's got a view when they
when they kind of like model these these things through.
I mean, obviously the increase it's as less positive environment
for investors, isn't it. So I think ordinarily you might
expect the be some supply implications of there.

Speaker 1 (02:55):
Kelly are called Westpact. For more from early edition with
Ryan Bridge, listen line to News Talks it'd be from
five am weekdays, or follow the podcast on iHeartRadio.