Jim Chalmers debt bomb costs us $60m a day

Jim Chalmers will reveal a $112bn debt bomb in the budget, with taxpayers funding interest payments worth more than $60m per day to service the nation’s $1 trillion debt pile.

CANBERRA, AUSTRALIA - MAY 2: Treasurer Jim Chalmers warns that ‘the cost of servicing the debt left behind by our predecessors is one of the fastest growing (budget) pressures’. Picture: Martin Ollman

Jim Chalmers will reveal a $112bn debt bomb in next Tuesday’s federal budget, with taxpayers funding interest payments worth more than $60m per day to service the nation’s $1 trillion debt pile over the next five years.

Paying down the debt bill, which has been impacted by higher interest rates, is now among the top two budget pressures alongside the National Disability Insurance Scheme and costs more than family tax benefit, child care and infrastructure.

Ahead of outlining the Albanese government’s budget repair strategy next week, the Treasurer said “this year alone the interest on debt will be just under $18bn and it rises to $26bn a year”.

With spending on the NDIS, health, aged care and defence projected to balloon over the long term, Dr Chalmers warned that “the cost of servicing the debt left behind by our predecessors is one of the fastest growing (budget) pressures”.

While revenue windfalls from record commodity prices and tax revenue will help lower deficits and likely put Australia in a surplus position in the near term, deficits in later years are expected to be higher.

“More than a hundred billion dollars of interest payments was the Liberals’ parting gift to the country,” Dr Chalmers said. “We’ve made substantial progress when it comes to repairing the budget and we’ll continue our efforts.

“It will take more than one budget to clean up the mess we were left with. We take our role in managing the budget very seriously and that’s why spending restraint and fiscal responsibility will be central to the Albanese government’s second budget.”

 

The Albanese government is expected to unveil additional savings and bank a significant proportion of upgraded revenue in Tuesday’s budget.

In an interview with The Australian, Finance Minister Katy Gallagher revealed that funding terminating legacy programs left behind by the Coalition would cost the budget up to $7.5bn.

Senator Gallagher, who is leading Labor’s waste and rorts audit, which found $22bn in savings in the October budget, said the government was focused on “restraint”.

“Anything we can do to reduce the amount we’re borrowing not only is good from our debt management point of view but it means lower payments on interest which is billions of dollars every year and growing,” Senator Gallagher told The Australian.

“Our thinking with this budget is when we are seeing substantial improvement in the near term to make sure we are actually enabling that to work for the budget repair in the longer term, which is borrowing less and having less interest to pay.”

The Finance Minister said ­legacy spending associated with terminating programs left behind by the Morrison government “is in the order of about $7bn or $7.5bn”.

“That’s the combination of all of those funding cliffs, where ­programs were ending. They’re everywhere, they’re in every department,” she said.

Senator Gallagher said “sensible and long-term strategies” would lock-in a blueprint that didn’t rely on windfall revenues continuing. “These are really tough calls. There’s thousands of decisions that culminate in a great balancing act,” she said.

“People who are saying that we want this on JobSeeker aren’t worried about what’s happening in defence, or what needs to happen in industry policy or what’s happening in the climate space”

“Part of our job is to try and get the best read we can across the board and come out with a set of decisions that try to find the right balance about what we need to do in the economy, what we need to do for budget repair, what we need to do to help people doing it tough, what we need to do to fix some of these long-term problems that have been kicked under the carpet.”

Senator Gallagher said the government was “trying to be pretty honest with people” about structural budget pressures.

“A big part of my work in this budget … is cleaning up the mess. I want to clear the deck on things that have not been dealt with properly.

“We’re bringing out the terminating legacy pressures, we’re looking at what we can do on the savings side within departments, we’re being honest about things like the cultural institutions that were about to close their doors so that we can effectively say to the Australian people we’ve flushed out all of the issues (and) this is what the budget looks like.

“That’s the way Jim and I want to be – to not pretend that these are things that can necessarily be accommodated without interventions like we are putting in place with the NDIS.”