What we know about the budget so far

Treasurer Jim Chalmers says his fourth budget in three years will be all about “repair, relief and reform” – but it will also be all about the government’s re-election chances.

With Prime Minister Anthony Albanese likely to head to the polls in the days after Tuesday’s budget, key elements of the document have already been released.

Many budget announcements are already known.Credit: Marija Ercegovac

They stretch from the small, such as the government’s $2.9 million response to the Australian Competition and Consumer Commission’s report into the supermarket sector, to the large, such as extra spending in health and defence.

Here are some of the key elements of the budget that we know.

Debt

Chalmers will reveal total government gross debt is expected to peak at 37 per cent of GDP in coming years, with a cumulative improvement of $207 billion to the bottom line compared to where then-treasurer Josh Frydenberg forecast the budget to be in early 2022.

The budget will confirm a saving of $60 billion in interest payments on total government debt over the 11 years to 2032-33. However, it will also confirm gross debt will cross the $1 trillion mark for the first time on record in the coming 2025-26 financial year.

That debt will be driven by expected budget deficits over the next four years. Economists are forecasting a deficit of around $20 billion in 2024-25, blowing out to around $40 billion next year.

This follows a surplus of $15.8 billion last financial year.

Cost of living

From July 1, all households and a million small businesses will have $150 wiped from their power bills through the second half of this year at a cost to the budget of $1.8 billion. Expected to reduce electricity bills by 7.5 per cent.

Beer

The budget will confirm a two-year freeze in the excise indexation increases on draught beer that will cost all taxpayers about $200 million in forgone tax revenue.

Health

The single largest known commitment is an $8.5 billion promise to increase bulk-billing incentives. Of that, only $2.4 billion has to be squeezed into the budget over the next four years.

The budget will contain a $689 million plan to reduce the cost of all scripts under the Pharmaceutical Benefits Scheme to $25. Another $644 million has been announced to open an extra 50 Medicare urgent care clinics.

Chalmers will confirm a $573 million women’s health package aimed at reproductive health and menopause.

The states will share in a $1.7 billion increase in public hospital spending, while the government has already made space for a $2.6 billion lift to wages for aged care workers.

Housing

An additional $850 million over four years will go into housing. Almost all will be used to increase income caps (and to acknowledge higher house prices) for the government’s help-to-buy scheme, which allows participants to buy a property with a deposit as low as 2 per cent.

This is being done as an equity injection into a government-operated fund, so it will not directly hit the budget bottom line.

Another $49.3 million will be offered to the states and territories to increase programs aimed at lifting the construction of prefabricated and modular homes.

Infrastructure

No pre-election budget would be complete without a big injection of money into infrastructure projects.

Queensland drivers have been promised $7.2 billion for an upgrade to the Bruce Highway, though much of the work will not be completed until next decade.

Victoria, where the government is battling to hold on to a string of outer-suburban seats, is being promised billions of dollars in terms of infrastructure. In the past fortnight, two relatively small projects – two intersection upgrades worth a combined $75 million in the Labor-held seat of Dunkley – have been announced by Albanese.

The budget will also confirm the provision of $1 billion to cover the cost of future rail corridors linking western Sydney to the Macarthur region.

Defence

The nation’s spy agencies will share in an extra $45 million as part of the government’s response to the national security intelligence review that was made public last week.

There is also $272 million committed to new Australian-made radars, $650 million to increase the number of long-range missiles and $262 million as part of strengthening supply chains linked to the AUKUS submarine project.

However, only $1 billion in spending will be brought forward.

Industry

The government last month announced almost $300 million in direct assistance to deal with the collapse of the Whyalla steelworks, with the chance of up to $1.9 billion more to upgrade infrastructure at the site.

Tropical Cyclone Alfred

The cyclone, which slammed into South East Queensland and northern NSW this month, will cost at least $1.2 billion in additional natural disaster and infrastructure spending. Along with other disasters, the total cost of natural disasters will be $1.9 billion higher than forecast in the mid-year update.

Economic outlook

Apart from spending on election sweeteners, the budget also contains key economic forecasts. The 2024-25 budget forecast a small lift in economic growth (which didn’t come to pass), higher unemployment (which has remained about 4.1 per cent) and a sharp slowdown in net overseas migration (which is on track to be about 80,000 higher than expected).

One area of particular importance will be the government’s outlook for inflation. In the mid-year update, Treasury forecast inflation to be about 2.75 per cent this financial year and through 2025-26.

At least for this year, Treasury may have slightly overestimated inflation.

Donald Trump

A key factor in the economic outlook will be events overseas. The impact of the Trump administration will be difficult to estimate, particularly as the president’s broader sweep of tariffs won’t be known until at least April 2.

Treasury estimates tariffs on Australia’s $1 billion a year steel and aluminium exports will cost the economy about 0.02 per cent of GDP by 2030. But once indirect impacts are taken into account, the estimated cost is 0.1 per cent of GDP, or about $3 billion.

However, a broadening of Trump’s tariff war – and its impact on China, which remains Australia’s most important export market – would cause much more pain.

Last week, America’s central bank downgraded its 2025 growth forecasts by 0.4 percentage points, or about $US120 billion.

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