With the jaws of defeat looming wide for Labor, Treasurer Jim Chalmers’ fourth budget sees the nation’s books back in the red, with $17 billion dollars’ worth of tax cuts to win back voters.
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I am Leon Gettler. My job is to review and monitor the week’s news in business, finance and economics. I bring it all to you, every week.
This is episode number 8 in our series for 2025 and today’s date is Friday March 28.
First, I’ll be talking to Rocky Lalvani who serves as a Chief Profitability Adviser for business owners and is the founder of Profit Comes First. He teaches his clients how to ensure they get paid, and they make profit a priority!
And I’ll be talking to independent economist Nicholas Gruen about the impact of Trump’s tariffs on global supply chains and the loss of trust in the US..
But first, let’s talk to Rocky Lavalni.
So what’s happening in the news.
In Labor’s re-election pitch, Treasurer Jim Chalmers’ fourth budget sees the nation’s books back in the red, with $17 billion dollars’ worth of tax cuts and efforts to “Trump-proof” the Australian economy. With Prime Minister Anthony Albanese on the verge of calling the 2025 poll date, the back-to-back surpluses of the previous two years have become a $27.6 billion deficit. There is no radical reform in the budget papers, nor an increase to JobSeeker unemployment support. The cost-of-living centrepiece is getting Australians “earning more and keeping more”, Chalmer said, with “top up” tax cuts. “The average tax cut is $50 a week,” the Treasurer says, although that figure is when it is combined with existing tax cuts. “We know there is an appetite for more tax relief. We understand that. We provide tax relief when we can afford to do that, but we are operating in the context of some pretty substantial fiscal restraints.” There’s a pledge to cut the 16% tax rate for those Australians earning over $18,200 to 15% next year and 14% the year after. The tax cuts announced in the budget are over two years from the next financial year. This is a second round of tax cuts after the rejigged Morrison-era stage three tax cuts that began last July. Every Australian will receive a cut of up to $268 from July 2026. After that, the average worker earning $79,000 per annum will get $50 a week in new tax relief, or $536 extra a year. “We acknowledge that these tax cuts in isolation are modest, but they are meaningful in combination,” Chalmers says. There’ll be considerable pressure on the Coalition to support the tax cuts, while they are attacking what they say is Labor’s “wasteful spending”. The other budget surprise is a move to abolish non-compete clauses for millions of workers. The budget states that the contract clauses are holding too many Australians back from switching to better, higher-paying jobs. More than 3 million Australians are captured by the clauses, and the Productivity Commission estimates the move could unlock $5 billion through increased productivity, and other measures. The budget themes for Labor are very similar to last year: cost-of-living relief, education funding, strengthening Medicare, building more homes and a Future Made in Australia.
However, Opposition Treasury spokesman Angus Taylor on Tuesday night left the door open for the Coalition to announce its own tax cuts before the coming federal election. “At a time when living standards have suffered the biggest collapse on record and when the security environment is the most dangerous since the Second World War, Labor’s budget has failed to deal with the economic and national security challenges our country faces,” he said. “The Coalition will not support these tax changes that do nothing to address the collapse in living standards under Labor.”
The 2025-26 budget deficit is now forecast to come in at $42.1bn, which is a slight improvement on what forecasts suggested at last year’s budget, handed down in May. But the subsequent deficits going out to 2028-29 are now much larger than previously estimated. Some of that deterioration is linked to the impact of the government’s signature budget measure, tax cuts next year and the year after. The budget papers show the new tax cuts are estimated to decrease receipts by $17.1bn over five yearsThe Labor government has allowed its deficit and debts to rise to deliver what it has described as “responsible” relief. Another budget metric that regularly draws political scrutiny, net debt, has also deteriorated, with the level now rising to $768.2bn by 2028-29. By comparison, the net debt figure never surpassed $700bn, according to forecasts made last May. The Coalition has argued the level of net debt, when measured against the country’s gross domestic product, should not be allowed to surpass 23.9% of GDP. While the Labor budget projections don’t breach that number, they do creep towards it, with the ratio expected to hit 23.1% by 2028-29.
With the jaws of defeat looming wide for Labor, it’s created a budget with a chance to cut through at the kitchen table. In the context of a cost of living crisis, this budget is firm in ignoring the big picture. Instead it points to the electricity bill pinned to your fridge and then opens the banking app on your phone. It is a budget deliberately injecting itself into the day-to-day conversations households have about income and spending. “It’s a plan to help with the cost of living,” said Treasurer Jim Chalmers at the very top of his budget speech, and certainly there’s little in there to distract from this. The budget will spend $1.8 billion on reducing electricity bills and an extra $17 billion on reducing tax bills. That supposedly means the median household will pay $150 less on their energy bill, and the average worker will get $536 more from their pay packets. Not bad. Quite nice, even. While the budget does not engage in profligacy, it barely glances in the direction of national vision or big-picture fiscal strategy. It’s simply not about that. “We are cracking down on supermarkets,” said the treasurer in his budget speech. That’s a strong line, backed by some moderate policy announcements, such as more than $38 million for the competition watchdog to do a bit more. Even if it means little in practical terms, it nevertheless hints the government is placing the concerns of middle Australia ahead of those of the Chairman’s Lounge. The electoral motivation is so plain as to inspire dmiration. Indeed, this is a classic democratic pattern. You start your term with the big-picture stuff, try to set policy that will last 100 years, aim for the stars. The Albanese government tried that with its referendum on the Voice to Parliament. It was defeated, and it seemed to falter. But now, with the finish line in sight, it is remembering the marginal voter. At this point of the cycle, Chalmers is not afraid to say material issues are what Labor is about. “At the core of our economic plan — and the very heart of our Labor government — is a simple objective: to ensure more Australians earn more and keep more of what they earn,” he said. The bulk-billing promise is another solid bribe. Nine out of ten doctor’s visits will be bulk-billed by the end of the decade, Chalmers saif. That’s a pledge that will soak up $8.5 billion. It comes on top of caps on prescription prices and plays to Labor’s strengths in health. Breaking down the budget from a demographic perspective is revealing. There’s not much in there for pensioners, while those in their 20s to 40s get more. HECS debts are going to be cut by 20%. Childcare is going to be cheaper too. One’s mind wanders to what the polling says about the ability of the government to shift votes in different age groups. Young men in particular are apparently turning to the right and rejecting “woke” ideologies, but can they be won back via hand-outs? Maybe. Another small offering in the direction of the male voter is cash incentives for apprentices who take up building. These are being doubled from $5,000 to $10,000.
Labor will spend more than $5bn to hasten the development of low emission technologies and the production of so-called green metals. The new funding deepens Labor commitment to its vision to reshape the country’s $2.5 trillion economy, moving away from its roots as a major exporter of raw minerals and one of the world’s largest per capita emitters. Labor said it would provide the Clean Energy Finance Corporation with $2bn and it set aside $3bn to aid the maturation of the green metals industry – metals produced using renewable energy. The CEFC offers cheap finance to companies or projects that can advance the country’s renewable energy sector and lower carbon emissions. Treasurer Jim Chalmers said the spending commitments underscored Labor’s commitment to reviving manufacturing. “We’re building a future made in Australia – creating jobs and opportunity for generations of Australians as we continue the work of making our country an indispensable part of the global net zero transformation,” Mr Chalmers said. Labor’s commitment to manufacturing is likely be well received in its traditional heartlands as seeks re-election at an election expected to be very close. Reviving manufacturing echoes a similar push by US President Donald Trump, who has used sweeping tariffs to force international companies to move operations to North America. But without the clout of the US, Labor has sought to use its centrepiece energy policy. Labor has set the ambitious target of having renewable energy generate 82% of the country’s electricity by 2030 and achieve net zero emissions by 2050. Labor hopes that the influx of renewables will allow for the creation of a metals processing industry, which China currently dominates.
The Budget papers show the Albanese government has reaffirmed its commitment to underwriting the future of embattled regional carrier Rex, aiming to get the business sold. Rex – Australia’s largest regional airline – fell into the hands of administrators last year after a failed attempt to compete head on with Qantas and Virgin Australia on major capital city routes ended in insolvency. The government’s financial exposure to Rex’s collapse is listed as a new fiscal risk in Tuesday’s budget papers. The airline is recorded under “potential contingency options” that could include a government takeover of the failed company. A loan of up to $80m has already been provided by the government to administrators EY to fund Rex’s ongoing operations until June of this year, and $50m of debt has also been acquired, making the taxpayer Rex’s largest secured creditor. In the budget papers, the government says it remains “committed to securing regional aviation” by working with the administrators and shortlisted bidders to “maximise the chance of a successful sale of the business”. “The Australian government will negotiate with shortlisted bidders to support a successful market-led outcome,” according to the fiscal update. “In the event there is no sale, the government will undertake work on contingency options in consultation with relevant states, including preparations necessary for potential Australian government acquisition of Rex. Further financial support, including to support the competitive sale process or in potential contingency options, would be subject to a future decision of government.”
Donald Trump’s tariffs have turbocharged Australians’ anxiety about their retirement savings. Several superannuation funds and financial advisers have seen a rise in calls from concerned clients and members in the wake of weaker returns in February and March It comes as new research from Aware Super found that almost two-thirds of over-45s are anxious or concerned about retirement as high living costs hurt many people’s plans. Aware Super’s State of Retirement report says 88% of Australians worry about running out of money in retirement, one in 10 retired later than expected, and 21% of retirees have returned to work. Many older Australians are rethinking retirement as the rising cost of living reduced the buying power of their nest eggs, and volatile financial markets add to the stress. Australian and US stock markets hit official correction territory this month – a 10% fall – and the average super fund has a majority of members’ money in growth assets such as shares. Tribeca Financial CEO Ryan Watson said he had seen “a significant increase in client concern and uncertainty as a result of the Trump tariffs”. Their key worries were instability and uncertainty across investment markets, he said. “Markets thrive on consistency and certainty – Trump and his tariffs provide the complete opposite of this. Cost of living is certainly a concern across all walks of society, especially across pre-retirees and retirees. Once you enter retirement, you only have a finite amount of investible funds.” The CEO of the Association of Superannuation Funds of Australia, Mary Delahunty, said she was hearing of more people contacting their funds.
The troubled private credit sector is now being investigated by the corporate regulator following a series of defaults and collapses. The Australian Securities and Investments Commission is demanding details on governance, valuation modelling and investor protection measures by April 14. ASIC has sent multiple private credit funds a 20-page questionnaire raising areas of concern about the sector: governance, various practices, conflicts of interest and fair treatment of investors. The private credit sector, which accounts for about 17% of Australia’s commercial real estate debt, according to consultants Alvarez&Marsal, has encountered problems including the relentless increase in construction costs, higher financing expenses which left a number of property developments unprofitable. The result: troubled loans forcing private sector funds to pause redemptions or reduce returns for investors. This comes after one of Australia’s largest financial planning networks, Count Financial, last week launched a wide-ranging review of private credit to assess whether the returns are worth the risk. After that, SQM Research, one of the largest ratings agencies covering private credit, put the sector on “watch” after an increase in problem loans and accusations it has transparency problems.
And that’s it for this week.
And next week, I’ll be talking to Greg Zakowicz, senior ecommerce marketing expert at Omnisend. He’ll provide all businesses with great marketing tips in the lead up to Easter which is the biggest sales event for this time of the year.
And I’ll be talking to Rabobank economist Michael Every about the impact of Trump’s tariffs on China and how these will affect the global economy.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com
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