In a recent analysis of the Federal Budget, outgoing NAB Group Chief Economist Alan Oster shared his insights with journalist Deborah Knight and incoming NAB Chief Economist Sally Auld. The discussion focused on the budget's implications for consumers and the economy.
Mr. Oster described the budget as election-related, emphasizing cost-of-living measures, significant health initiatives, and an unexpected tax cut. "This is a pre-election Budget that they probably didn’t think they were going to give. A lot of the big issues were already out there," he stated.
The budget includes several key measures announced by Treasurer Jim Chalmers:
- Tax cuts: A reduction in the lowest marginal tax rate from 16% to 15% starting July 2026, with a further decrease to 14% from July 2027.
- Cost of living relief: Extension of the current electricity subsidy with a $75 quarterly rebate until the end of 2025 at a cost of $1.8 billion.
- Health: Strengthening Medicare through increased incentives for GP bulk-billing.
- Childcare: Guaranteeing parents three days of subsidized childcare if they earn less than $533,280 annually, effective January next year.
- Student loans: A proposed reduction of all outstanding Higher Education Loan Program (HELP) debts by 20%, pending legislation approval.
- First home buyers: Expansion of Labor’s Help to Buy scheme by increasing property price and income caps.
- Productivity: Proposed ban on non-compete clauses for those earning up to $175,000 annually.
Discussing global economic conditions, Mr. Oster noted ongoing weaknesses and high geopolitical uncertainty. "Globally the big risks are geopolitical – Trump, tariffs. What we’re really seeing here is we don’t know," he said.
Incoming economist Sally Auld highlighted how the budget addresses domestic cost-of-living pressures and supports efforts to reduce inflation. "We’re only six weeks or so away from election, a very domestically focused budget," Dr. Auld remarked.
Regarding inflation and interest rates, Mr. Oster observed that wage growth has slowed to 3.2%, while inflation is decreasing rapidly. He emphasized core inflation and geopolitical concerns as critical factors influencing future cash rate decisions. "To me, I look at this and I say to it’s not helping the Reserve Bank in rate cuts," he commented.
Reflecting on his tenure at NAB spanning over three decades, Mr. Oster expressed optimism about Australia's economic future despite current challenges. "It’s been a pleasure to work in NAB...I’m leaving on a good note," he said.
He also spoke about his motivation for pursuing economics: "The reason I did it is...I want my kids to have a job."
For more detailed insights into the Federal Budget, readers can access comprehensive commentary on NAB's Business Research & Insights website.