Australians should not expect a “big cash splash” from this year’s federal budget although the government will bank a smaller share of any increase in expected revenues, the treasurer, Jim Chalmers, told a Sydney audience.
Chalmers said there would likely be “additional cost-of-living help in the budget but it won’t be anywhere near the magnitude of the tax cuts”.
The amended stage-three tax cuts to take effect on 1 July will pump about $21bn into the economy.
“Any extra help will be targeted, responsible and affordable. There will not be big cash splashes in the budget, simple as that,” Chalmers told the Committee for Economic Development Australia lunch.
“We are already providing a tax cut to every taxpayer, and a bigger tax cut to more workers; we need to be upfront and say that any additional help will only be a fraction of that,” he said.
With two months to go before the 14 May budget, the treasurer has been keen to play down expectations that the government has a revenue windfall to shower on the electorate. Falling iron ore prices and a weaker labour market ruled out a repeat of large upgrades to revenues enjoyed in the past two budgets, Chalmers stated in comments released ahead of today’s speech.
While the government was still seeking a second consecutive budget surplus, it was prepared to spend more of any additional revenues.
It would bank “a substantial amount of the upward revision, but not all of it – in all likelihood not as much as we did in the first two budgets”, he said, adding the government spent 8% and 18% of the extra revenue in those two years.
“Twice our predecessors banked none of their upgrades, even when one was bigger than we are expecting this time around,” Chalmers said. “We are still committed to banking as much as we can.”
The challenge for the government is to limit any extra spending that might alter the Reserve Bank’s plans for interest rates. The RBA hiked interest rates 13 times between May 2022 and November 2023 and has not ruled out further increases, although investors and economists expect the next move will be a cut later in 2024.
Chalmers also noted that the government’s recent spending announcements would limit its move to make further promises, while also removing some of the budget night’s news value.
These included “a big increase in defence spending”, the plans for a super guarantee on paid parental leave to start from July 2025 and “substantial investments in remote housing as part of Closing the Gap”.
“Even apart from the $107bn in tax cuts, there are billions of dollars of budget initiatives out there already,” he said. “Anything that’s too costly, too splashy, risks undoing the good progress we’ve made together on inflation.”
Chalmers also revealed plans to reappoint the treasury secretary, Steven Kennedy, for another five-year stint once his term ends in September. “I thank and pay tribute to my Liberal predecessor for appointing someone of Steven’s calibre, someone who has served both sides of politics with diligence and distinction,” the treasurer said.
“We want to provide some certainty and stability here, we have a lot of important work on the go, so we are starting the [re-appointment] process now.”
In a question and answer session at the end of his speech, Chalmers said the balance of risks was shifting from inflation to the economic slowdown. But that shift “was not an invitation to go from a sole focus on inflation to a sole focus on growth”.
“Every budget asks us, requires us to strike a series of fine balances,” he said.
Chalmers said people were “still under the pump” and there remained “a case for more targeted help”.
The budget, though, also faced long-term challenges, particularly interest payments, health and aged care, the NDIS and defence. “I think there is an opportunity for a proper national conversation about the structural pressures on the budget,” Chalmers said.
