When the Women in Economics Network was formed six years ago, women were almost non-existent in the economic conversation.

In 2019, Streem media monitoring released analysis showing that of the top 50 economists cited in the Australian media, only nine were women. And collectively, those nine had a similar number of media mentions as just one man, the admittedly prolific Shane Oliver.^[1] 

The Women in Economics Network made one of its objectives to raise the profile of women in economic debates.

And, as the woman who slipped in at number 50 on that list back in 2019, I can say that today the media landscape looks and feels different.

Shane remains prolific, but the range of people now gracing our TVs and radios, commenting on everything from interest rate rises to climate policy, is now far more diverse.

I think the economic conversation, and even economic policy, has changed for the better because of that diversity. 

So thank you to the Women in Economics Network, to the National Press Club, and the media outlets that have been part of that shift.

The three backdrops to this budget

Let’s turn now to the 2023 Budget.

All budgets are a product of their time. They respond to the economic and social climate of the day. They reflect the priorities of the government delivering them, but also the political realities those governments face.

For this budget there are three major backdrops that will shape its formation and how we measure its success. First is the macroeconomic reality.

Australia came out of the COVID recession in better economic shape than any of us might have dreamed in those anxiety-inducing early months of the pandemic. Growth came back with a vengeance in 2022, and along with it a beautiful set of labour market numbers – unemployment with a 3 in front, under-employment down to 6 per cent, and participation at record highs.^[2]

But the less desirable side-dish of a strong economy, sauced with a series of supply shocks, has been much higher-than-comfortable inflation.

Real household incomes went backwards in the past year, as households have felt the cost-of-living squeeze.^[3]

Normalisation of supply chains, as well as the Reserve Bank’s stiff medicine – 11 cash rate rises and counting – is starting to bring inflation down, though it remains well above target, at 7 per cent.^[4] And it isn’t forecast to get back into the Reserve Bank’s 2-to-3 per cent comfort zone until mid-2025.^[5]

Households feeling the squeeze will invariably look to government for support. The spending wish-list facing the government in its budget preparation is long.

Yet a ramp up in government spending would risk keeping inflation higher for longer. The overall goal must be to take money out of, rather than put more money into, the economy. 

The second defining backdrop to this budget is the coalescence of demands for more support for the most vulnerable.

Advice published in the past few weeks from the government’s Economic Inclusion Advisory Committee and the Women’s Economic Equality Taskforce – the latter of which I’m a member – made powerful cases for higher spending on those facing severe hardship.

After 20 years of slipping further behind community living standards, Australia’s unemployment benefits are now among the lowest in the OECD.^[6]

The Economic Inclusion Committee found that the current level of the JobSeeker payment and other payments such as Youth Allowance are ‘seriously inadequate’.^[7]

The maximum rate of Jobseeker – $347 a week for a single person, or $430 a week with full Rent Assistance and supplements – does not allow people to meet minimum basic needs.^[8]

People on these payments are forced to choose between paying for their medicines, or energy bills, or food. They struggle to find affordable rental properties.

The rationale for maintaining payments at low levels is to provide an incentive to find work. At just 43 per cent of full-time minimum wages, the incentive is undeniable.^[9] But the payment is so low that it actually acts as a barrier to work. It’s hard to be ‘job ready’ when you can’t afford transport to the job interview or are pre-occupied with how you are going to feed your kids that night.

Given this, the Economic Inclusion Committee recommended a sizable increase to JobSeeker and related payments.

The Women’s Economic Equality Taskforce called for the single parenting payment to be extended to parents with children above the age of 8. Currently many single mothers are pushed onto the lower JobSeeker payment when their youngest child reaches that age.

Both committees recommend an increase to Rent Assistance given the distance the $79-a-week payment has slipped behind private rents.^[10]

Addressing this list could put a serious dent in poverty in Australia. It would make Australia a better and fairer nation.

But after so long in the ‘too hard basket’, doing it all at once would come with a sizeable price tag. 

This pushes up against the third defining challenge: the size of the structural budget problem.

Australia’s medium-term fiscal outlook is far from healthy. Spending on the NDIS, defence, hospitals, and aged care are all expected to grow strongly over the next decade.^[11]

Government spending is projected to average more than 27 per cent of GDP over this period, compared to less than 25 per cent over the three decades before COVID.^[12]

Revenues have not kept up. Future structural budget deficits are projected to be about 2 per cent of GDP, or about $50 billion a year, in today’s dollars. Grattan Institute estimates the true number could be closer to $70 billion.^[13] Debt is expected to continue to climb even as the economy stabilises. 

This fiscal challenge may be hard to fathom when we look at the short-term ‘happier’ budget numbers. Revenue windfalls are back with a vengeance.

A stronger-than-expected labour market and high commodity prices, especially relative to Treasury’s comically conservative assumptions, are expected to see revenue write-ups total more than $200 billion since the pre-election fiscal outlook.^[14]

The government’s Monthly Financial Statements show that the budget was in surplus in March 2023 and the year-to-date deficit was a much more modest than expected $11 billion.^[15]

But if there is any fiscal lesson this country should understand it is the danger of locking in long-term spending against short-term gains. The Treasurer’s commitment to bank ‘most’ of the revenue upside is welcome. I will be watching with interest to see how far the definition of ‘most’ might be stretched come budget night.

A fork in the road

So how does the government ‘square the circle’ on these three big themes? The needs of the most vulnerable suggest spending more. But the macroeconomic and fiscal circumstances dictate restraint.

Assuming the government acts in a broadly economically responsible way, there are two ways forward.

The first path, and the one I expect the government will take, is the cautious one.

The government will probably adopt some of the lower-cost proposals that would help ease the squeeze on the most vulnerable. Judging from what’s in the public domain, expanding the parenting payment to parents with children under 12-to-14 is the most likely candidate.

And while the price tag for doing this runs to hundreds of millions of dollars over the next few years^[16] – hardly small change – the government is steering clear of the most expensive and far-reaching proposal.

The $132 weekly increase in JobSeeker recommend by the Economic Inclusion Committee would cost the budget almost $6 billion a year and help 920,000^[17] Australians on JobSeeker and related payments.^[18]

The government has ruled out an increase of this magnitude.^[19]

But wherever it lands, the fiscal reality is pushing the government to go smaller and narrower than many, including many on its own backbench, would like.

Consistent with this cautious approach, the government will take some tentative steps on budget repair – largely by pursuing modest measures that don’t offend many people.

On spending, that means cracking down on rorts and waste.

It means embracing cost-of-living measures that don’t hit the bottom line, such as the eminently sensible changes to the pharmacy dispensing rules.

On tax, it means increases that only hit a small group of individuals and businesses that are unlikely to generate much political sympathy.

Already announced is the higher tax on superannuation earnings for the 0.5 per cent of Australians with balances higher than $3 million in retirement.^[20]

Also on the cards are tweaks to the petroleum resource rent tax to make sure gas producers, currently enjoying windfall profits, make a higher contribution for their use of Australian resources.

Most other changes to tax have been ruled out.

Overall, the picture is a budget of incremental change. It will make some things a bit better and not too much worse. But ultimately it will only play footsies with the big social and fiscal challenges.

Which brings me to the second, bolder path.

This approach would be politically harder but would enable the government to go further on meeting some of Australia’s most pressing economic and social challenges.

On the economic challenge, restoring Australia’s productivity growth and growing the pie is critical for our long-run living standards.

To give it its due, the government is making headway on a number of fronts, including improving and streamlining the migration system, reforming general practice, and pushing changes to improve education standards. Executed well, these all have the potential to bolster the growth outlook.

But some other pressing changes require government investment.

This government has recognised the critical role that women play in the economy. Australia will not meet its potential until we better use the capabilities of our highly talented women. As the Women’s Economic Equality Taskforce chair Sam Mostyn noted at this very lectern just two months ago:^[21]

The full utilisation of one of the most educated, energetic, and capable cohorts — women — has never been more important, and we know women want that opportunity

The government’s commitment to more affordable and accessible early learning and care, and increasing parental leave and making it more gender equal, are important steps on this journey.

The Women’s Economic Equality Taskforce points to further priorities for improvement.

One is better pay for workers in the care sector. While pay rises for aged-care workers are on their way, childcare educators earn little over the minimum wage. The fact that trained workers doing this critical and emotionally challenging work earn little more than those flipping burgers at McDonald’s or working the checkout at Bunnings should shock us.

And the market reality is now biting. Poor pay and conditions are affecting the capacity of the care sector to attract and retain workers. Jobs and Skills Australia estimates that Australia needs an extra 22,000 early childhood workers in the five years to 2026.^[22]

Worker shortages risk compromising the workforce participation benefits that should be unlocked by more affordable childcare from 1 July. Finding a path towards higher pay for these educators should be a priority.

The second is the childcare activity test.

The activity test significantly restricts access to subsidised childcare for families where one parent works less than 16 hours a fortnight.^[23] And while it was conceived as an incentive to encourage mums to work, it has achieved the opposite. Many parents have been caught in a ‘chicken and egg’ conundrum: they cannot find a job because they haven’t got suitable care, but they can’t get subsidised care because they don’t have a job.

Women in Economics Network Chair Dr Angela Jackson – in the audience today – has estimated that the removal of the activity test would result in 40,000 more women with children under 5 participating in the workforce and an increase of $4.5 billion per year to the economy.^[24]

Over time, measures that give women an opportunity to participate in the paid workforce, and children the chance to get high-quality early learning and care, pay dividends many times over.

Another area where there is scope to be bold is housing.

Last year’s National Housing Accord set a target of 1 million new homes over five years ­– something the cynic would perhaps note is pretty much in line with number of new homes built over the previous five.^[25]

But what the Accord did get right was the centrality of housing supply in improving affordability. As well as creating more dwellings, boosting supply in the areas people want to live – generally in suburbs within a reasonable distance to major urban centres – would supercharge growth in economic activity.

The biggest barrier is overzealous planning restrictions that impede medium-density development in our inner and middle-ring suburbs. State governments have the capacity to change this, but the NIMBY backlash often weakens resolve.

The federal government should offer incentive payments to state governments to add new housing supply. This would be an investment in better long-term social and economic outcomes.

Finally, in the bolder world, the government could also support an increase in JobSeeker and related payments that would reduce poverty and support work readiness for the close to one million Australians living on them.

All this daring has a price, and the government would need to neutralise the inflationary and fiscal impacts of these proposals by making hard decisions on increasing taxes and reducing spending elsewhere.

While there are no easy options, there are many that make sense, especially in a fiscally constrained world. So let me embrace boldness and make some suggestions.

Grattan Institute’s pre-budget report Back in black? proposed a menu of options for tax increases and spending reductions that could make a meaningful dent in the budget deficit.^[26]

Redesigning the Stage 3 tax cuts – by retaining the 37 per cent tax bracket – would reduce the size of tax cuts for high-income earners and save about $8 billion a year. This alone would offset the fiscal and inflationary impact of a JobSeeker rise.

Reducing tax breaks and minimisation opportunities – by winding back superannuation tax concessions, reducing the Capital Gains Tax discount, limiting negative gearing, and setting a minimum tax on trust distributions – could collectively raise more than $20 billion a year.

Reducing fuel tax credits to better reflect the environmental damage caused by heavy vehicles would add another $4 billion a year.

Grattan’s report also canvasses changes to the superannuation preservation age, freezing the Superannuation Guarantee, and a higher and/or broader GST as possible options.

On spending, the best discipline would be to adopt better processes for infrastructure and defence procurement. Making better decisions upfront, based on economic rather than political considerations, would have saved tens of billions of dollars over the past decade. And while we can’t get that money back, we can do better in future.

Our report puts forward another $15 billion-a-year of savings measures, including undoing the WA GST deal, counting more of the family home in the Age Pension asset test, and improving hospital efficiency and purchasing in health.

Over time, changes will also be needed to sustain the fast-growing NDIS.

I understand these are not easy conversations. One commentator on the weekend labelled them ‘courageous’ in the Sir Humphrey sense, and I’ll come back to the degree of difficulty in a moment. 

But a budget that brought in some combination of these measures would be a bold play for a richer, fairer, and more fiscally sustainable Australia.

And I think that is worth going into bat for. 

The price of boldness

Let’s now talk briefly about the price of boldness. This budget marks almost a year in office for the Albanese government. This would normally be the budget where the government makes the ‘hard’ decisions in the hope they are long forgotten by the next election. So if steady-as-she-goes is the theme for this budget, it will almost certainly be the overarching theme for the government’s first term.

One common refrain from those hoping for bigger reforms from government is to sheet home the entire blame to politicians – suggesting that the ‘current mob’ lack vision or courage or leadership.

And while I’m sure there is some blame to go around, I think the reasons governments over the past two decades have struggled to do ‘hard things’ are more complex. 

Given I’m at the Press Club, the home of Australia’s media, let me suggest one important contributor: the media as an amplifier of conflict in so called ‘national conversations’.

This is nowhere more obvious than tax policy. Tax needs to be on the agenda for governments. Tax reform could contribute to higher growth. We also need to collect more revenue as a share of the economy, because the structural deficit is too large to realistically be closed by spending reductions alone.^[27]

And although some in the media love talking about the political difficulty of tax increases, it is media outlets that give a disproportionate share of airtime to tax changes compared to other decisions made by governments. Indeed, too often the rhetoric is dialled up to 100 as front pages are littered with anyone who stands to lose one dollar.

Let’s take this budget’s super tax changes as an example. This modest change – to wind back tax breaks for only 80,000 of the most well-off – was labelled a ‘class war’,^[28] a ‘death tax by stealth’,^[29] and a ‘super-sized broken promise’.^[30] 

It received front-page coverage from major tabloids, wall-to-wall coverage in our two national papers, and generated more than 1,200 online media mentions in the month after it was introduced.^[31]

In contrast, the government’s policy to expand government paid parental leave to 26 weeks and encourage more dads to take leave – announced just six months earlier and benefiting about 180,000 families a year^[32] – received less than a quarter of the coverage in the four weeks after it was announced.^[33]

Similarly in the 2019 election, Labor’s $1.6 billion-a-year policy to wind back negative gearing^[34] – at that point a five-year-old policy for the party – received more coverage in the election campaign than Labor’s two new major new spending commitments, $800 million-a-year for free dental cover for seniors and $600 million-a-year^[35] to tackle out-of-pocket costs and waiting lists for cancer patients, combined.^[36] 

Does this just reflect public sentiment?

Interestingly, no. When the public were polled about the super changes the week of their official announcement, 64 per cent supported the policy, including 70 per cent of voters under the age 50.^[37] Not bad for a policy claimed to be ‘an attack on middle Australia’.^[38]

The media may have been surprised at the public’s views, but I wasn’t.

We have seen exactly the same disconnect between volume and tone of coverage and resilient public popularity for other tax changes, when they are on the agenda, such as winding back negative gearing.^[39]

None of this to say that tax changes – or indeed spending reductions –are easy. But we shouldn’t confuse media excitement with an inability to bring the public along.

My reading is that when our political leaders do the work of tilling the ground and explaining changes and why they are needed – hearts and minds can shift.

That is why I will continue to advocate for bold policy.

Bold is what we need to meet our current economic and social challenges, and that is the benchmark by which I will judge the government’s efforts next Tuesday night.