‘Hidden traps’ left behind flagged as major drag on upcoming budget

Traps left behind by the former Morrison government has Labor reeling just weeks out from handing down its second budget.

A minefield of traps paired with unavoidable spending pressures and concerns about the global economy has the government playing down expectations ahead of the May budget.

Treasurer Jim Chalmers has revealed that while higher commodity prices and tax take from low employment would boost the bottom line, programs baked into the budget without funding allocations were keeping him and the budget razor gang up at night.

“There will be billions of dollars of unavoidable spending where programs have not been budgeted for even though every single Australian would assume that they will continue indefinitely,” he told a closed-door Business Council of Australia breakfast.

“That will be a big spending item.”

Dr Chalmers gave what he labelled a ‘frank’ assessment of the budget challenges to the BCA. Picture: Dan Peled / NCA NewsWire

Dr Chalmers cited the My Health Record system, used by 23 million people and worth almost $300m each year, was only funded to the end of this financial year.

A self-confessed “bleary eyed” Treasurer told the meeting he is receiving twice-daily briefings about the volatility of the global financial system in the wake of the failure of the Silicon Valley Bank.

“We convened last week APRA, ASIC, the RBA and Treasury, we’ve been taking soundings from the banks and others in the corporate world, and the consistent message from all of these briefings is that we are well-capitalised, well-regulated and well-placed as we confront this volatility in the global financial system,” he said.

“Our banks don’t have the same exposures as some of their US counterparts, they regularly hedge their risks, and the regime is much tighter since the Global Financial Crisis as well.”

The government's second budget will be handed down on May 9.

The ongoing tightening of monetary policy and slow global growth will continue to impact the budget but Australia’s inflation peak appears to be behind us, he said.

Dr Chalmers is just 47 days away from handing down the government’s second budget on May 9.

He flagged “responsible” cost of living relief, investment in supply-side productivity, national security priorities such as AUKUS, care economy, and breaking down the barriers to women’s full participation as his key priorities.

But despite expectations the government will bank a “significant” multibillion-dollar boost from elevated commodity prices and low unemployment, the Treasurer echoed hints of potential cuts foreshadowed from the Finance Minister.

“We’re still working to find the best balance of near-term and longer-term priorities, the best combination of relief, repair and restraint, and putting a premium on the quality of spending not just the quantity.”

Originally published as ‘Hidden traps’ left behind flagged as major drag on upcoming budget