- Treasury Budget update reveals bigger deficits
Anthony Albanese’s pre-election spending spree could be stopping Australians from getting a rate cut.
Treasury’s Mid-Year Economic and Fiscal Outlook, released on Wednesday, revealed government debt levels and income tax collections had risen since the May Budget.
Government spending as a proportion of gross domestic product is also at the highest level in almost four decades, outside of the pandemic, which will also mean bigger Budget deficits in coming years.
This is occurring as Labor goes on a spending spree, with $16billion to be spent on university fee debt relief as another $5billion is spent on childcare.
But ahead of the figures being released, Treasurer Jim Chalmers denied Australia had a spending problem – despite concerns from economists about escalating spending.
‘The Reserve Bank Governor herself has said that public spending is not the main game when it comes to our inflation challenge,’ he told Sunrise on Wednesday morning.
‘We have made a lot of progress on inflation, we’ve got a bit further to travel, but the Budget position is a very responsible budget position.’
Reserve Bank of Australia Governor Michele Bullock in August did say ‘public demand is not the main game’ but in November added ‘I should emphasise here it’s not just the federal governments, it’s the state governments as well’ that are helping to keep inflation high.
Anthony Albanese ‘s government’s pre-election spending spree could be stopping Australians from getting a rate cut
The Budget update projected a deficit $46.9billion for 2025-26, up from the $42.8billion figure predicted in the May Budget.
Gross government debt in the next financial year was also set to climb to $1.028trillion, higher than the $1.007trillion level forecast in May and making up 36 per cent of gross domestic product.
The Reserve Bank of Australia has declined to cut interest rates in 2024 with its 4.35 per cent cash rate now higher than equivalent policy rates in Canada and New Zealand.
This is occurring even though those nations have this year cut interest rates, along with the U.S., UK and European Union.
Deloitte Access Economics said: ‘The federal Budget’s bottom line is deteriorating under the weight of escalating spending and Australia’s economic challenges.’
Partner Stephen Smith said the government was collecting too much from income taxes and spending too much on superannuation concessions.
‘Australia’s fiscal settings are increasingly inequitable,’ he said.
‘Almost half of all revenue raised by the federal government is sourced from taxes on individuals.
‘At the same time, major tax expenditures such as the concessional taxation of superannuation contributions and earnings, and the capital gains tax discount, disproportionately benefit the wealthiest Australians.’
Treasury’s Tax and Expenditures Statement released on Tuesday showed the government would forfeit $24.2billion in revenue in 2024-25 from taxing superannuation earnings at 15 per cent during the accumulation phase but not taxing it at all during the retirement phase.
Treasurer Jim Chalmers denied Australia had a spending problem
