Every year I give a name to the Budget created by our national Treasurer. I call this year’s effort from Dr Jim Chalmers the magical ‘hocus pocus’ Budget, where he pulls a rabbit out of his hat, but it becomes a ‘now you see it, now you don’t’ trick!

This kind of crystal ball promising makes the captivating claim that the ‘promise’ that every worker gets a tax cut a little misleading because workers will have to wait until July 2026 to pocket these cost of living giveaways.

Of course, a Treasurer promising tax cuts if you vote for his government is nothing new. But what a politician gives on one hand can be taken back with another. So, this escalation in our budget deficit, where the underlying cash deficit is projected to be between $30 billion and $40 billion a year through to 2028-29, not only increases the country’s public debt but could feed into inflation and make the Reserve Bank go easy on interest rate cuts.

Most newspapers looked at the eventual $5 tax cut ($268 a year in 2026-27 going to $536 in 2027-28 or two cups of coffee from a café a day) but the big issue is this: how does the RBA see these ‘gifts’ that are earmarked for 15 months’ time?

Right now, bank economists think we could see at least two more rate cuts this year, while some think three and one next year. Clearly, if these tax cuts came this July not next, the RBA could cancel rate cuts altogether. The central bank boss Michele Bullock has noted that fiscal restraint would make her job easier.

Interestingly, the $A rose overnight and that could indicate that foreign exchange dealers could be reducing the number of expected rate cuts for Australia, thanks to these pre-election Budget giveaways.
For those who might think I’m playing an anti-Labor card with my Budget reaction, I’d rather be accused of being what I’ve been trained to be — an economist!

This Budget is about politics and the Albanese Government being re-elected not economics. It’s the strongest reason why we need four-year terms for our national governments.

For those who want my quick summary of the big budget plays, here are 20 things I’ve gleaned so far:

1. Every taxpayer i.e. 12 million workers will get anincome tax cut.
2. These start July 2026.
3. Workers will get a $268 tax cut over 2026-27 and this grows to $536 a year in 2027-28.
4. The 8.8 million workers earning between $45,000 and $135,000 get most of the money and this is an important voting group.
5. Households and small businesses will get an extra round of the $150energy bill rebate that reduces bills by 7.5%.
6. PBS medicines costs will go down from $31.60 to $25, ($690 million).
7. $8.5 billion to be set aside to pay GPs to bulk-bill adult patients.
8. Students and graduates will have 20% of theirstudent debt wiped.
9. The deficit for 2024-25 is $27.6 billion. The figure will deepen to $42.1 billion in 2025-26. In 26/27 it will be $42 billion. Last year it was a surplus of $15.8 billion!
10. Economy guesses: Growth 2025-26: 1.5% to 2.25% year-on-year. Inflation in the 2-3% band; Real wages to rise; Net immigration 260,000 2025-26 versus 335,000 this financial year. (Queensland gets the most — 23,200).
11. The first home buyers Help to Buy scheme changes: income caps for access will rise from $90,000 to $100,000 for singles, and from $120,000 to $160,000 for joint applications, while the maximum purchase price in each city will also rise to reflect higher home prices. (SMH)
12. $54 million is being paid to states and territories for programs that lift the construction of prefabricated and modular homes.
13. The Australian Taxation Office will receive $5.7 million to enforce a ban on foreign investorsbuying existing homes for two years from next month.
14. Doubling incentive payments (from $5,000 to $10,000) forconstructionapprentices.
15. There’ll be $3 billion allocated to finishing the NBN rollout.
16. The government will boostdefencespending by $10 billion over four years.
17. A $20 million “Buy Australian”advertising campaignwill encourage shoppers.
18. The government has committed to abolishing non-compete clauses in job contracts for low- and mid-wage workers. These are clauses that forbid people for a certain time period from going to a work for a competitor to their current employer, or from running a competing business of their own.
19. The Medicare levy low-income thresholdswill be increased. More than 1 million low-income households, seniors and pensioners will continue to be exempt from paying the levy or pay a reduced rate. A single person will save up to $122 a year. (AFR)
20. The indexation of draught beer excise paused for two years!

I’ve called this a magical Budget. The word magical means – “the power of apparently influencing events by using mysterious or supernatural forces”. That’s exactly what Dr Jim and Albo are trying to do with this Budget for when we go to the polls, probably on May 17.

The only concern for the Government might be if the RBA shows it’s worried about the Budget and its impact on inflation and therefore interest rate cuts. The central bank meets next week on April 1. Their statement that will go with the expected ‘no change in rates’ decision could prove a bombshell for the Government if it expresses concerns about the upcoming deficits and their impacts on inflation and rate cuts.

That would mean this Budget ‘hocus pocus’ play might end up as a magic trick gone wrong. But that would be a gutsy call by Michele Bullock.