A hint of optimism
Bottom line forecast now down to $37bn
NEW Treasurer Jim Chalmers will today lay out his road map to steer Australia through historic economic turmoil, declaring his first budget will halve the forecast deficit and reduce debt.
It can be revealed Labor’s federal budget will post more optimistic figures than expected in March, with the bottom line now forecast to be $36.9 billion in the red for 2022-23.
Mr Chalmers will have to stare down criticism over grant program and infrastructure cuts from unhappy state governments, and pitch to the nation his “family friendly” budget with a $135.3bn spend on health and aged care this year alone.
“We are putting a premium on restraint and resilience because that’s what the times call for,” he said.
Despite the upgraded figures, Mr Chalmers will warn of more financial pain to come due to economic “headwinds,” including higher rates, inflation and slower growth.
“In times of extreme global volatility and uncertainty, our best defence is a responsible budget, and that’s what you’ll see,” he said.
Mr Chalmers said the “primary influence” on the budget was inflation.
The more than halving of the deficit, which was forecast in March to reach $78bn for 2022-23, has been fuelled by higher tax revenue and lower expenses, such as welfare payments.
Mr Chalmers said the improvements were also a result of the government’s work to return a majority of the increased revenue to the budget, rather than on new spending.
“Our responsible approach to revenue upgrades means the budget bottom line will be more than $40bn better over the forward estimates in aggregate, and debt will be lower than previously forecast,” he said.
Factors like higher commodity prices are not expected to last, with the budget expected to show big spending pressures, like the cost of servicing the debt and paying for the NDIS, are substantially higher than what was forecast in the Coalition’s March budget.
This means deficits will get worse toward the end of the four-year forward estimate period compared to earlier forecasts.
Even with these pressures, the budget will forecast $42bn in total improvements to the budget bottom line by 2024-25.
At the March budget gross debt was forecast to pass $1 trillion in 2023-24 and hit $1.17 trillion in 2025-26, by which time net debt — taking into account government assets — would be $864.7bn.
All of this figures are expected to be downgraded on Tuesday.
Mr Chalmers said not only would the budget show “less debt” than under the Coalition government, but promised Labor would have “more to show for it”.
“We’ve been left with a trillion dollars of debt and a budget deep in structural deficit, but hard decisions mean we can still deliver our commitments, keep spending under control, and start down the long road of budget repair,” he said.
It’s been almost a decade since Labor handed down a federal budget, with Prime Minister Anthony Albanese telling his caucus colleagues in a meeting on Monday there would be three key themes.
Delivering on Labor’s federal election commitments, “responsible” economic management, and “targeted” cost of living relief will be central to the budget, Mr Albanese said.
The PM also promised the government would continue to offer flood relief support to “where it is needed” and not “on partisan lines drawn on maps”.
In the lead up to the budget the government on Monday confirmed it would not be continuing several regional infrastructure grant programs established by the previous Coalition government.
Infrastructure Minister Catherine King claimed the government was “restoring integrity” to regional funding by opting not to proceed with round six of the Building Better Regions Fund and scrapping the Community Development Grants program.
Instead Labor has allocated $1bn in the budget over three years to form the Growing Regions Program and Precincts and Partnerships Program, which will deliver funding to regional local councils, not-for-profit local organisations and to support large-scale projects in regional and rural areas.
“The government will consult on the guidelines to ensure best practice transparency and consistency of process, as well as fairer distribution of funds to ensure people can have confidence in the new programs,” Ms King said.