Welfare costs up $33bn
Inflation increases pressure on federal budget
HIGHER pension and welfare payments as a result of soaring inflation will add almost $33bn to government spending over the next four years.
Treasurer Jim Chalmers said the government had been forced to find room in the budget for the funding as he revealed the figure on Sunday in a series of interviews.
Dr Chalmers said about a third of the additional $32.8bn would go towards higher age pension payments and another third to increased Jobseeker payments for the unemployed.
“We know that people are still doing it tough,” he told the ABC.
“But one of the pressures on the budget is making sure we can find room for that indexation so that people who are on pensions and payments get a little bit of help twice a year to try and keep up with these skyrocketing costs of living.”
Almost five million Australians began receiving increased welfare and age pension payments earlier this month because of indexation. This is a legislated, automatic recalculation of welfare payments that happens every six months in line with changes to the consumer price index.
The government has rebuffed calls from welfare advocates to further lift the rate of Jobseeker and other social services payments in this budget.
Dr Chalmers told Sky News the $32.8bn was one of the “consequences” of a high inflationary environment.
“We’re used to thinking about some of the benefits to the budget from high commodity prices but there are swings and roundabouts in the budget,” he said.
He has promised to deliver “responsible” cost of living relief when he hands down his first budget on Tuesday night.
But he has warned of deficits for years to come, the structural pressures of paying for mammoth public services such as the NDIS, and the effect of inflation on government spending.
Inflation is expected to peak at 7.75 per cent by the end of this year and drop to 5.75 per cent by the middle of next year and 3.5 per cent in mid-2024.
Dr Chalmers also conceded on Sunday that wages growth was not expected to keep up with the rising cost of living until 2024 at the earliest.
Workers’ pay will effectively go backwards until then, when inflation is forecast to have fallen back within the Reserve Bank of Australia’s target range of 2-3 per cent.
Opposition treasury spokesman Angus Taylor said on Sunday the Coalition would wait to see the complete budget before making a decision on whether to support it in parliament.
Mr Taylor said the Coalition would only support a “responsible” budget, but “the early signs aren’t good”.
He argued the Coalition had left the economy in good shape and urged the government to rein in spending in order to return the budget to surplus.
Labor will need to rely on the crossbench to pass its budget through the Senate if it fails to win over the Coalition.