What the Reserve Bank thinks of Chalmers’ budget will be nearly as important as the voters’ opinion

Jim Chalmers has produced a benign third budget aimed at soothing hard-pressed voters agitated about their high cost of living and punishing interest rates.

At the same time he has walked a tightrope, trying to avoid the handouts making things worse rather than better.

Despite its appearance, this is unlikely to be the pre-election budget. With the poll due by next May, Anthony Albanese is still anticipated to run full term.

His very narrow parliamentary majority and voters’ grumpy state of mind would make an election this year a risk. That means another budget can be expected around March. Indeed, the prime minister has flagged it.

An eye to the Reserve Bank

But this budget still has the election firmly in mind. The voters’ mood has to be improved, and Chalmers is hoping its relatively substantial assistance will help do the trick. And the government desperately needs interest rates to fall – hence the stress on caution, so that the projected fall in inflation materialises.

What the Reserve Bank thinks of this budget looms as almost as important as what the average voter thinks of it.

So, as Chalmers has been telling us, the treasurer has had to juggle the economics and the politics.

Read more: Relief on energy bills for all in a federal budget that bets on lower inflation

The universal help on energy bills and the extra rent assistance fit both requirements nicely. They give relief which cut inflation (at least in the short term) rather than adding to it.

The biggest relief, of course, comes from the tax cuts, which are in themselves the equivalent of a reduction in interest rates. The government’s decision early this year to recalibrate the Stage 3 tax cuts, meaning all taxpayers get a prize, has been long vindicated - the broken promise has faded from most memories.

Apart from hard-pressed households, the government has had a careful eye in the budget to particular constituencies, including women (superannuation on paid parental leave and more) and young people (changes to HELP indexation and payments for placements).

Handouts aplenty, negatives hard to find

Many welfare advocates, however, will be disappointed. While they’ll welcome the rent assistance, the Economic Inclusion Advisory Committee’s recommendation for a big boost to the overall level to JobSeeker has not been met (although there is an increase for Australians with only a partial capacity to work).

With an emphasis on handouts, the budget is also notably light on negatives. Whatever nasties it has are limited or well-hidden.

Its future large deficits indicate the government has deferred a serious attack on the structural deficit to another day. Or another term.

The budget launches the prime minister’s signature Future Made in Australia policy, which is costed at $22.7 billion over the next decade.

Read more: At a glance: the 2024 federal budget split four ways

The government hopes voters will make their immediate judgements about the budget on the criterion of “what’s in it for me?” With Future Made in Australia, it is relying on people responding to the “vibe” - the idea of Australia becoming an energy superpower, or making more things.

Chalmers and Albanese justify the policy, which includes expensive tax incentives, largely on the basis other countries are playing on this ground, and Australia can’t be left behind. Perhaps. But many respected economists condemn it as little more than old-fashioned interventionism and picking winners.

Read more: Budget 2024: Chalmers fights inflation, will it be enough for a rate cut?

However it will be years before the wisdom of some of the policy’s investments can be properly assessed, so the government will feel reasonably confident any backlash is likely to be a long time coming.

Albanese told the Labor caucus on Monday this was “a Labor budget through and through”.

It’s a pretty accurate description. It’s generous in spending,with an ideological tinge. The critics will say it’s too “Labor” for the times.