‘Unavoidable pressures:’ $12.4bn cost blowouts in age pension, natural disaster relief add to budget woes

Treasurer Jim Chalmers has warned federal coffers have been strained due to $12.4bn in ballooning costs as Labor prepares to hand down a restrained budget.

Previously, Dr Chalmers has talked down prospects of the mid-year-economic and fiscal outlook being a ‘spendathon’. Picture: John Gass

Treasurer Jim Chalmers has warned federal coffers have been strained due to $12.4bn in ballooning costs of the age pension, superannuation to military members, veterans’ entitlements and natural disaster relief, as Labor prepares to hand down a restrained budget.

Days after scrapping the $6.8bn electricity rebates, the Treasurer flagged “unavoidable pressures” like upward revisions to the Natural Disaster Relief fund by $6.3bn, a $3bn increase in Age Pension payments, $1.3bn in health and care services for veterans, plus $2.1bn in support for military superannuation schemes.

Australia is expected to record a budget deficit of $42.1bn in 2025-26, and remain in the red until 2035-36.

Previously Dr Chalmers has talked down prospects of the mid-year-economic and fiscal outlook being a “spendathon” and said future cost-of-living relief would shift from temporary measures like rebates to “permanent” help, like the legislated tax cuts and bulk-billing incentives.

Treasurer Jim Chalmers has warned federal coffers have been strained due to $12.4bn in ballooning costs. Picture: John Gass

Dr Chalmers said estimates across a “range of areas are putting considerable pressure on the budget”.

“The biggest job in the mid-year update has been making room for unavoidable pressures and payments without a substantial deterioration in the bottom line,” Dr Chalmers said.

“Our predecessors underfunded services and shamefully short-changed veterans, but we take our responsibility to these people very seriously and we’ll always make room in the budget to do the right thing by these Australians.”

His comments come as economists have criticised Labor’s high government spending for fuelling inflation, with figures reaching 26.5 per cent of GDP in 2024.

Government departments were also ordered to find savings of 5 per cent in the lead up to MYEFO following blowouts in wages.

However this is not expected to result in redundancies and job cuts, despite Commonwealth public sector jobs increasing 5.6 per cent year-on-year, with Finance Minister Katy Gallagher previously backing the current size of the public service.

Ms Gallagher said the budget update will focus on “practical help for households and communities,” while “meeting unavoidable costs” and “protecting the bottom line as much as possible”.

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Originally published as ‘Unavoidable pressures:’ $12.4bn cost blowouts in age pension, natural disaster relief add to budget woes