’Paying what we owe’: One thing set to blow out the nations budget deficit

Australian treasurer Jim Chalmers says the budget will likely be blown out by billions in part due to funding this project.

Australia’s next budget update will show billions in additional spending as the government flags “paying veterans what they owe”.

New spending measures for veterans are expected to be announced as part of the Mid-Year Economic and Fiscal Outlook (MYEFO), which is likely to blow out the budget estimates from May.

Australia’s budget is set to be blown out by an additional $1.8bn. NewsWire / Glenn Campbell

According to the Labor Party, the mid-year update was expected to include $6.5bn in additional expenditure paying out claims for 42,000 veterans for past services to the country.

But a combination of additional claims and the severity of payments to individuals, means the government will now spend an additional $1.8bn on funding this program.

Labor flags extra money for veterans is one of the reasons why there’ll be slippage in the budget update from May, although did not clarify as to what other additional expenses are impacting Australia’s budget.

Treasurer Jim Chalmers said “we’re doing the right thing by our veterans” which will impact the budget, claiming this was in part due to the Morrison government slowing the support for payments to veterans.

“Supporting those who served our country is our responsibility,” Mr Chalmers said. “We’re paying veterans what they’re entitled to.”

“Pressures on the budget are intensifying, estimates variations like payments to veterans are a big part of the story and you’ll see that in the mid-year update.”

The MYEFO update provides information on the government’s fiscal position compared with estimates made during the budget time in May.

On the plus side the budget could be boosted by rising iron ore prices, which is still above $US100 a tonne since its run up in September and a fall in unemployment, according to November’s ABS figures.

Jim Chalmers says paying out the additional expenses to veterans is the right thing to do. Picture: NewsWire / John Gass

Finance minister Katy Gallagher attempted to draw parallels between the Liberal and Labor saying it would be unforgivable to turn away from veterans now.

“When the Liberals and Nationals were in government, they refused to take the steps needed to ensure veterans would receive the payments they are entitled to. Now, in opposition, they refuse to support our changes to clean up the mess they created,” she said.

The announcement follows the Australian federal government releasing its response to the final report of the Royal Commission into Defence and Veteran Suicide, on December 2.

The federal government has accepted more than 100 recommendations from the Royal Commission into Defence and Veteran Suicide, promising major reform in the sector.

Prime Minister Anthony Albanese said today his government had initiated “one of the fastest responses in government” to a royal commission inquiry, after the report was released three months ago.

In total the government said they will support 104 of the 122 recommendations, with 17 being selected for further consideration and one being not supported in part.

”We can’t bring back those who we’ve lost but we can fight to stem this terrible epidemic and strive to bring it to an end,” Mr Albanese said on December 2.

“We have the deepest respect for every Australian who wears our nation’s uniform.

”We will work tirelessly to improve the system and keep them safe.”

Short term gain long term pain

Westpac senior economist Pat Bustamante said on December 11 he expects a short-term revenue sugar hit when the budget is released, only for greater debt in the future.

Westpac predicts Australia’s debt to continue rising. Picture: NewsWire / Nikki Short

“When the Federal government unveils the 2024-25 Mid-Year Economic and Fiscal Outlook next week, we expect to see a slightly better estimate of the bottom line in 2024-25, and a deterioration from 2025- 26 onwards, compared with the May budget.” Mr Bustamante said.

The economist forecasts an increase in new government borrowing to around 6.25 per cent of nominal GDP by 2026-2027 in line with levels of borrowing seen during and after the GFC.

“Borrowing of this magnitude has previously been a response to a significant deterioration in the labour market and the threat of a protracted recession. While we expect the labour market to soften from here, the scale of that shift does not compare to those previous episodes,” he said.