Budget tough love could deliver Labor an election-winning surplus

Treasurer Jim Chalmers could turn Labors political fortunes around with spending cuts that deliver budget surpluses, lower inflation and interest rate relief ahead of the 2028 Election.Stephen Koukoulaswrites.

Economic tough love now, political gold in future If, over the next few weeks, TreasurerJim Chalmerscan convince Prime MinisterAnthony Albaneseto change and show a bit of spine on economic policy, Labor can go to the 2028 election campaign with the political gold dust of budget surpluses, lower inflation and interest rate cuts to present to the electorate.

With the Mid-Year Economic and Fiscal Outlook(MYEFO)about six weeks away, there is time for the Government to bring together policy changes to transform the economic and political landscape.

Why budget policy change would help the economy There is no doubt that a significant revamp of the budget settings will help to create a perception that the Government is playing a critical role in the strategy to get inflation back to target.

A series of spending cuts would help to cap the level of interest rates and, it is increasingly likely, could be a critical part in getting lower interest rates in 2027 and early 2028, just in time for the next election.

Australias slowing economy, easing house prices and weaker wage growth show policies to curb inflation are beginning to work.

If ever there was a time for the Government to successfully prosecute a budget tightening, it is now.

Inflation is too high and is likely to stay high for some time.

Interest rates are high, which is political poison doing nothing on the budget will let this issue fester.

A budget tightening would get the budget very close to a surplus, which at the current time is economically responsible and, for the Government, political gold.

Spending cuts are likely to be accepted by the electorate in these troubled economic times.

Consumer sentiment, like support for the Labor Party, is floundering near 50-year lows.

Consumers are under financial pressure as they deal with high interest rates, falling house prices and weak real wages.

If they can see the Government taking the tough decisions to help fix these problems, the electorate will be more likely to be positive about this rather than negative about the cuts that should be delivered.....