Inflation is the headline issue pushing Treasurer Jim Chalmers in his third federal budget, but the finance minister is confident responsible measures the government is taking will temper pressures.
In an interview with the radio program ABC RN Breakfast, Katy Gallagher said Treasury had forecast inflation would be back within the Reserve Bank’s target band of between 2 and 3% by the end of 2024.
This prediction had informed budget decisions, mostly concerning cost-of-living issues, with the effect of putting downward pressure on inflation.
“Obviously the biggest part of [the budget measures will be] the tax cuts but in addition to that, a cost-of-living package,” Gallagher told the radio program on Monday.
“It will also have decisions that lay down the foundations for future growth, particularly through our Future Made In Australia plan.”
Gallagher, who is also minister for women and the public service, noted all budgets were challenging in their own way but the 2024-25 one posed the unique task of encouraging growth in the economy as well as keeping inflation down.
This was a balancing act, Gallagher said, highlighting budget announcements that have been made ahead of Tuesday’s event and the first budget surplus to be delivered in 15 years.
Big structural spending line items such as health, aged care, the NDIS and Defence would also rely on decisions made in future budgets, she said.
“It’s ongoing work. We have been dealing with them in every budget and we will continue to do so. In terms of the spending and some of those pressures — they are … increasing, they’re not decreasing,” Gallagher said.
“[Surplus is a] big help on the inflation front, and we’re shooting for another one. We’ve got savings in the budget, and we’ve got reprioritisation,” she said.
Defence in particular, which will receive an extra $5.7 billion over four years in tomorrow’s budget (and $50.3 billion over the next decade), will reprioritise $22 billion to other areas identified as “high priority”. This was an example of responsible budget management, Gallagher said.
The federal government’s response to Australia’s housing crisis, transition to net zero, were similar policy areas that required a smarter investment approach, she said.
“We’re looking at spending — it’s not just the quantum of the spend, it’s the composition, it’s the timing, it’s the quality of the spend — and it’s dealing with some of those issues that you know are big challenges that we’ve inherited after 10 years of no decision,” Gallagher said.
“The discussion for the last couple of years [has been] about the narrow path … how do you moderate inflation without smashing the economy?”
As proof that the government was not ignoring its role in the area of economic growth, as well as tackling inflation, Gallagher pointed to the ‘Future Made in Australia’ plan launched by the PM last month.
“There’s significant investment going in because we want to seize some of the opportunities that come with this global transition to net zero,” Gallagher said.
“We want Australia to have a stake in it and we want the jobs and economic growth that come with it.”
The federal budget will be handed down by Treasurer Jim Chalmers on Tuesday, just one week after the latest meeting of the secretaries board.
During the meeting, the heads of Australian government departments were briefed by Finance secretary Jenny Wilkinson and Treasury’s deputy secretary Victoria Anderson.
The group also received an update on the work of the government’s in-house consultants’ group known as Australian Government Consulting (AGC) and discussed how the new fitout could support the public service.
One of the 2024-25 budget’s cost-savings elements is $1 billion worth of cuts to external labour hire, consultants and contractors. It is a small part of the government’s ambitions to save a total of $77.4 billion in the next financial year.
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