Mid-year update will be sensible, not a spendathon

Dealing with inflation in the near term and building productivity in the longer term are the government’s primary goals, says Jim Chalmers.

The standout feature of this month’s national accounts was the positive, promising and continuing recovery in the private sector. We saw it in strong business and housing investment numbers and in the productivity data, especially for the market sector.

As Reserve Bank governor Michele Bullock acknowledged last week, the private sector is taking over from the public sector as the key driver of growth. Since we came to office, business investment has grown by an annualised average of 3.9 per cent. It went backwards on average by 1.3 per cent each year under our predecessors, but we’ve helped turn that around.

In the most recent quarter, new business investment grew at the fastest pace in almost a half-decade and was the primary driver of growth in the quarter, driven by a surge of investment in technology.

It’s a similar story for housing. When we came to office, housing investment was going backwards by 3.6 per cent, but it has now expanded for seven consecutive quarters, and in the latest numbers it’s growing 6.5 per cent in annual terms on our watch. The worst decade for productivity in the past half-century was the decade before we came to office. It’s still more subdued than we’d like, and we’re cautious about reading too much into quarterly or even annual numbers given the history, but we’ve seen some encouraging trends, and again especially in the private sector.

Productivity has now grown for four consecutive quarters, and in annual terms it’s growing at 0.8 per cent and 1.1 per cent in the market economy. We also see the private recovery in the labour market, with four out of every five of the 1.2 million jobs created under the Albanese government in the private sector.

There’s no shortage of challenges in our economy but this private sector recovery, so conspicuous in the national accounts, means we confront global volatility and persistent price pressures from a position of genuine economic strength.

We’ve had two years now of real wages growth, per capita incomes are growing again after falling sharply in the months before we took office, and three interest rate cuts this year are providing billions of dollars in welcome relief. Private demand drove all of the growth in our economy over the past year. The private sector recovery we’ve been planning for and preparing for is gathering pace. In just a year, annual private demand growth has lifted more than fivefold, while annual public demand growth is less than a third of what it was a year ago.

This momentum is welcome, it’s deliberate and it’s the foundation for what comes next.

Since the Sunday after the election in May, we’ve put productivity at the very core of our agenda, not because there are quick wins but because we know it’s central to a stronger economy and higher living standards for our people over time.

That’s why I convened the economic reform roundtable in August and it’s why we’ve already made remarkable and substantial progress on the key reforms agreed there. In a recent five-day stretch, for example, we legislated the new environmental laws, agreed new competition reforms with the states and released our artificial intelligence plan. That’s more reform in five days than our predecessors managed in the five years before Covid.

Our environmental reforms will mean faster approvals, and that’s good for the economy. They were fast-tracked at our reform roundtable.

The work we’re doing with the states and territories on national competition policy, skills, fast-tracking approvals, boosting housing supply and budget sustainability was again a big feature of the reform roundtable.

The national AI plan is all about maximising the opportunities of artificial intelligence while minimising risks, again building on priorities and directions established at the reform roundtable.

This flurry of reform builds on a number of substantial steps already taken in recent months. We’ve passed new legislation to streamline regulation. We’ve asked the financial regulators to facilitate a deep dive on financial sector regulation, including prioritising the streamlining and harmonisation of data collection. We’re pausing and modernising the National Construction Code, and blitzing the backlog of housing approvals.

We’re introducing national occupational licensing for electrical trades and harmonising standards across states and territories. We’re introducing heavy vehicle reforms and progressing work with the states and territories on road user charging. We’re simplifying trade, slashing hundreds more nuisance tariffs and introducing a single front door for investment.

Dealing with inflation in the near term and building productivity in the longer term are our primary goals, but key to that are our efforts to make our economy more resilient and our budget more sustainable.

Since the Sunday after the election in May, productivity has been at the very core of the government’s agenda, says Treasurer Jim Chalmers. Picture: NewsWire / John Gass

The mid-year budget update I release with Katy Gallagher this month will be part of this effort, but it won’t be a mini budget and it won’t be a spendathon.

The biggest job has been making room for unavoidable pressures and estimates variations in areas such as veterans, natural disasters and more, without a substantial deterioration in the bottom line. There’ll be more savings and more restraint because that is what helped us already engineer the biggest nominal three-budget improvement to the bottom line, including two surpluses and a much smaller deficit.

We’ve found more than $100bn in savings since coming to office and there’ll be more to come. By responsibly managing the budget, we’re able to fund the things that matter most to Australians such as strengthening Medicare, cheaper medicines, slashing student debt, and tax cuts for every taxpayer.

The mid-year update will be sensible and it will be responsible. The main game will be in May and it will be focused on more reform. We’ve made a lot of progress – that’s clear from the national accounts and from the changes we’ve put in place in recent months – but we recognise the job’s not done. The story of 2025 has been the welcome return of the private economy. The government’s reform agenda is all about building on that momentum.

This will be the central focus of the budget next year, and the consensus and directions established at the reform roundtable will be the key influence on our thinking.

Jim Chalmers is federal Treasurer.