Money
Chalmers calls budget responsible, supports economy recovery
Chalmers unveils budget addressing economic challenges, with support for Medicare, cost-of-living relief, and ongoing deficits projected until 2036
Chalmers unveils budget addressing economic challenges, with support for Medicare, cost-of-living relief, and ongoing deficits projected until 2036
– Treasurer Jim Chalmers presented a “responsible” budget for economic resilience with cost-of-living relief and support for Medicare.
– The budget forecasts a $28.3 billion deficit and rising net debt, while unemployment remains low at 4.5 per cent.
“We’re dealing with a fifth economic shock in less than 20 years,” Chalmers says.
“The conflict in the Middle East and closure of the Strait of Hormuz has disrupted the global economy and the global outlook.
“Oil production fell by 8 million barrels a day in the first month of the war — almost eight times more than any of the oil shocks since the 1970s.”
All of this has made the outlook much more uncertain, he adds.
“Treasury’s central forecast assumes oil stays around $US100 per barrel until the end of next month and glides to $80 by the end of June next year,” he says.
“On that assumption, it would still be above its pre-conflict price in 12 months’ time.
“This means Treasury now expects global growth to slow from 3.5 per cent last year to just 3 per cent this year.”
Economic strategies
Chalmers outlines five key components of the budget strategy.
These include managing the global oil shock, easing pressure on citizens, increasing productivity, reforming the tax system, and achieving a more sustainable budget.
Inflation is predicted to peak at about 5 per cent due to the ongoing conflict in the Middle East.
Inflation is expected to drop to 2.5 per cent by mid-next year, within the Reserve Bank’s target range of 2-3 per cent.
Assumptions include oil prices peaking at US$100 per barrel next month and decreasing to US$80 by June.
If these conditions hold, Australia may avoid a recession, though growth may slow to 1.75 per cent.
Unemployment is forecast to remain low at 4.5 per cent through 2025-26.
“Important because the world is throwing a lot at us – and this budget is about helping Australia deal with these challenges,” he says.
“And ambitious because we have so much going for us – and this budget is about Australia seizing those opportunities.
“War in the Middle East has been pushing up prices, pushing down growth, and punishing Australians.
“It has exposed weaknesses in the global economy and intensified longstanding challenges here at home.
“We didn’t decide when this war began and have no control over when it will properly end. But how we respond is up to us.”
Deficit details
The budget reveals a projected deficit of $28.3 billion for the 2025-26 financial year.
Future deficits are expected to reach $31.5 billion in 2026-27 and $31 billion in 2027-28.
Australia’s net debt is anticipated to rise to $616 billion in 2025-26 and $767.8 billion by 2029-30.
Gross debt is projected to exceed $1 trillion for the first time in 2026-27.
Chalmers has termed this budget one of the “most important and ambitious” in decades, responding to significant global challenges while aiming to leverage national strengths.