Treasurer flags big cuts are coming as he prepares his budget

As Australians struggle with a cost of living crisis, the Treasurer has flagged bigger cuts are on the way.

The Treasurer has issued a warning that big cuts lie ahead as he prepares to hand down his first budget later this year.

Jim Chalmers and his Finance Minister Katy Gallagher said they were combing through the nation's budget to draw a line under perceived waste and rorts.

But after inheriting a trillion dollars in debt, any potential savings won’t be enough to bring the budget back into line.

Treasurer Jim Chalmers has flagged further cuts are on the way. Picture: NCA NewsWire/Dan Peled

“When it comes to the budget position, I think there is a case for a more substantial look at trimming and cutting back some of this wasteful spending that we’ve inherited,” he told the Australian Financial Review.

The pair have already identified $350m in savings by removing the Coalition’s community development program – which was used by the previous government to funnel cash into marginal seats.

An additional $500m was found by axing a regionalisation fund that had yet to get off the ground.

Speaking with Nine, Education Minister Jason Clare said it was all about ensuring Australians were getting “bang for (their) buck”.

“We have inherited some massive challenges,” he said on Saturday.

Mr Clare insisted Labor’s promises were safe as Nine radio’s Neil Mitchell badgered him.

“We have to make sure when we hand down the new budget in October … we get bang for buck, that the taxpayers are getting value for money.”

The focus of Dr Chalmer’s first budget will be to implement Labor’s election promises.

Mr Clare insisted Labor’s cornerstone promises, such as cheaper childcare, were all safe from the budget razor gang.

“We need to keep our promises and we will implement them … absolutely,” he told Nine.

But he was forced to defend Dr Chalmer’s comment that the government would not automatically push for the Fair Work Commission to match wage rises with inflation.

The government won’t automatically push for future wage rises to meet inflation

“We said that before the election as well,” the education minister said.

“We said there were special circumstances where real wages had gone backwards for the last 12 months and forecast to go backwards for the next 12 months.”

But the big challenge for the new Treasurer will be looking towards the next election and how Labor can make the case for budget repair, indicating reform could be on the agenda.

“Something has to change, about the way that the nation looks at its economic and fiscal challenges and my contribution to that is to institutionalise some of this thinking,” he said.

Inflation could rise to seven per cent by the end of the year. Picture: NCA NewsWire/Dan Peled

With inflation forecast to hit seven per cent and concerns of a looming recession, Dr Chalmers said state’s looking for a handout in October should look elsewhere.

“There may have been a time in the past, where state budgets were demonstrably weaker than Commonwealth budgets. But that’s not the case now,” he said.

“I have been heartened by the recognition around the country that we do all have our own budget challenges, and there’s not a bottomless pit of Commonwealth cash to solve everything.”

Originally published as Treasurer flags big cuts are coming as he prepares his budget