Budget update ‘within days’ as PM prepares to call election

The federal government is preparing to release an economic update within days that could be used as a springboard for Prime Minister Anthony Albanese to announce an early April election and kill off the need for a March budget.

As new figures show the budget bottom line improving, this masthead can reveal public servants and election planning staff within Labor are preparing for Treasurer Jim Chalmers and Finance Minister Katy Gallagher to release an update that is likely to predict an easing in inflation and a stronger jobs market.

Jim Chalmers with the 2024 budget mid-year update. His is likely to release an economic statement within days.Credit: Alex Ellinghausen

It would mean abandoning a planned March 25 budget, which would have been the earliest during a calendar year in Australian history, that the government has maintained for weeks it is poised to deliver as it completes a full 3-year term.

Chalmers has regularly maintained he is working to deliver a March 25 budget, but has noted that he will “be ready for whatever scenario when the prime minister calls the election”.

But sources speaking to this masthead on condition of anonymity said preparations were well underway to convert the planned budget into an economic update that would contain key forecasts for the economy and budget while accounting for some policy announcements.

It would be released just before, or just after, Albanese confirms the date for the coming federal election. Many analysts expect the prime minister to begin the federal election campaign just after the West Australian state contest is decided on March 8. That would make election day April 12.

The economic update would also be used to talk up the improvement in the overall economy, which has been in a per capita recession since late 2022, even as government gross debt hits a record $947.1 billion.

Economic statements, or early budget updates, have been used by both major parties in a bid to control the narrative around the state of the nation’s finances and the economic outlook before an election.

In 2007, then-treasurer Peter Costello pulled forward the mid-year budget update by almost two months. Containing $35 billion in personal income tax cuts, the update was released the day after John Howard had announced that year’s election date.

Six years later, then-treasurer Chris Bowen released an economic statement three months after Wayne Swan’s May 2013 budget. The update revealed a $33 billion deterioration in the budget bottom line plus tax changes, including a planned overhaul of novated leases that prompted an angry backlash from those affected by the changes.

Under the Charter of Budget Honesty, the Treasury and Finance Departments must release their own pre-election economic and fiscal outlook (PEFO) within 10 days of the writs for an election being called.

This document, unlike budgets or mid-year updates, is completely controlled by apolitical public servants, presenting a risk it could contain figures uncomfortable for a government. In both 2007 and 2013 there was little difference between the budget update and the PEFO.

As recently as Wednesday, Treasury secretary Steven Kennedy said the department was working towards a March 25 budget. But under questioning from Liberal senator Andrew Bragg, Kennedy said turning a budget into an economic statement would be a “decision for the government”.

In a sign of the uncertainty about Albanese’s election plans, going to the election without an economic update and relying on a PEFO is still an option open to the government.

In his mid-year budget update, released in December, Chalmers forecast unemployment to reach 4.5 per cent this year and next, with inflation to be 2.75 per cent over the same period.

Since then, inflation pressures have eased more than expected. It was one of the reasons the Reserve Bank cut official interest rates by a quarter percentage point earlier this month, which many households will begin to see in mortgage repayments from Friday, February 28.

Prime Minister Anthony Albanese with Energy Minister Chris Bowen and NSW Energy Minister Penny Sharpe in Sydney this morning. Credit: Wolter Peeters

Unemployment has also been lower than expected. The Reserve Bank now expects unemployment to average 4.2 per cent over the next two years.

Finance Department figures released on Friday suggest the budget is improving due to the ongoing strength of the jobs market, commodity prices and superannuation sector.

In the seven months to the end of January, the budget was $3.6 billion better than had been expected. Personal income tax collections were $600 million stronger than anticipated, company tax was up by $2.5 billion, and superannuation taxes were $500 million above forecasts.

While revenue is up, government spending is almost $2 billion lower than had been expected.

Despite the improvement, the figures point to Albanese going to an election overseeing a sizeable budget deficit. In December, Chalmers forecast a deficit of $26.9 billion for the 2024-25 financial year and a $46.9 billion shortfall in 2025-26.

This year’s deficit follows back-to-back surpluses, the first since 2007-08.

The Treasurer’s office was contacted for comment.

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