What we know so far about the federal budget
Jim Chalmers will hand down his pre-election budget on Tuesday with “substantial” help for struggling Aussies. Here’s what we know.
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Treasurer Jim Chalmers will hand down his pre-election federal budget on Tuesday promising “meaningful and substantial” cost-of-living relief for struggling Aussies while seeking to avoid fuelling inflation with cash handouts.
Labor’s fourth budget is likely to contain few surprises, since really it was the budget we weren’t supposed to have — the arrival of ex-Tropical Cyclone Alfred earlier this month scuppered Prime Minister Anthony Albanese’s plans to call the election that weekend for April 12.
Firing the starting gun on the election campaign would have avoided the need to set down the federal budget on March 25. And yet here we are.
In a pre-budget speech in Brisbane on Tuesday, Mr Chalmers tempered expectations for huge announcements, but said “responsible” cost-of-living relief would once again be a key theme.
“We know people are still doing it tough and that’s why cost-of-living relief remains a major focus of our government,” he said.
Speaking later on ABC’s 730, Mr Chalmers insisted inflation would not be affected.
“[The budget] will recognise that even though we’ve made a lot of progress together — we’ve got growth rebounding solidly, inflation down, real wages up, unemployment low, we’ve got the debt down — they’re all good developments but people are still doing it tough,” he said.
“And that’s why there will be cost-of-living relief in our fourth budget just like in the first three, but it will be really responsible once again.”
Here’s what we know.
Key numbers
The budget is tipped to show a cash deficit of $26.1 billion and revenue downgrades of $11.3 billion over the next four years.
After posting Australia’s first budget surplus in 15 years, Mr Chalmers confirmed on Monday that the budget would be back in the red amid domestic and global headwinds.
“A defining feature of our first three budgets was responsible economic management,” Mr Chalmers said.
“That will be a defining feature of the fourth as well. Even this year, where we will be printing a deficit for this year, it will be much, much smaller than what we inherited from our political opponents, and that shows the progress we have been able to make.”
Wages grew 0.7 per cent in the December quarter, the slowest quarterly rate since March 2022, bringing annual wages growth to 3.2 per cent.
Inflation was up 0.2 per cent over the December quarter and 2.4 per cent annually, down from a 2.8 annual rate in the prior quarter.
Unemployment remained flat at 4.1 per cent in February.
The Reserve Bank last month delivered a pre-election boost for the government with a 25 basis point cut to interest rates, down from 4.35 per cent to 4.1 per cent.
Mr Chalmers said the Australian economy had “turned a corner”, highlighting 0.6 per cent GDP growth in the December quarter.
He said contrary to incorrect predictions, Treasury expected the tax-to-GDP ratio would remain stable or even go down this year.
But Treasury expects any revenue upgrade to be “about a sixth of the average of our budget updates, the smallest of our four budgets by far”.
“This is largely due to commodity prices and volumes dipping and also our labour market normalising,” Mr Chalmers said. “So this will constrain our choices and put an even bigger premium on what’s responsible and affordable and achievable.”
Energy bill relief
With energy bills set to rise by up to 9 per cent from July, Mr Chalmers promised more relief was on the way.
But he would not commit to an extension of the $300 energy rebate the government announced in 2024.
“What I can say is that there’ll be more cost-of-living help in the budget, the form of that will be made clear to you and over the course of the next week or so,” he said.
The Australian Energy Regulator (AER) has revealed household power bills could rise between 2.5 per cent and 8.9 per cent from July, depending on where a person lives, while small business customers could see rises between 4.2 per cent and 8.2 per cent.
Canstar data insights director Sally Tindall said a $200 per household increase was a “sucker punch”.
“Electricity price rises impact pretty much everyone, but they hurt those on lower incomes the most as these households are shelling out more of their income to keep the lights on,” she said.
Mr Chalmers conceded that Labor would not meet its election promise to reduce power bills by $275.
“The number that you’re referring to which we all used on a number of occasions was a forecast in 2021 about an outcome in 2025,” he said.
“There’s been a lot of uncertainty, a lot of volatility between 2021 and 2025, and so our responsibility is to first of all understand and accept electricity prices are a big part of the pressure on families, on households, on pensioners, to do what we can in the near term which we have with our energy rebates and in the longer term with our cleaner and cheaper more reliable energy, and in that I would happily stack up our plan against this nuclear insanity any day.”
$25 prescription cap
Pharmaceutical Benefits Scheme (PBS) scripts will be capped at $25 from January 1, which would slash the cost of prescription medicine to the lowest level in 20 years.
The move could save people with chronic health conditions up to $200 a year, with the government providing everyday examples of a perimenopausal woman or a child with ADHD saving around $80 a year on a standard script.
The cost of medicine on the PBS is already frozen at $7.70 a script for concession cardholders. However, non-concession card holders pay $31.60.
Under the changes proposed that will be slashed to $25 a script saving some patients in a move designed to also put downward pressure on inflation.
Pensioners and concession cardholders will continue to benefit from the freeze on the cost of their PBS medicines, with the cost frozen at its current level of $7.70 until 2030.
The government says four out of five PBS medicines will become cheaper as a result of the $689 million investment in the budget.
“Cheaper medicines is another way we are helping with the cost of living, while putting downward pressure on inflation — our number one focus,’’ Mr Albanese said. “With cheaper medicines, more free GP visits and a stronger Medicare, we say to Australians, ‘We’ve got your back.’”
$1.2 billion Alfred impact
Mr Chalmers said the budget would reflect Treasury’s initial estimates of the impact of Alfred, amounting to an “immediate hit to GDP” of up to $1.2 billion.
“This could wipe a quarter of a percentage point off quarterly economic growth, and with businesses temporarily shuttered the economy shed about 12 million work hours,” he said.
“It could also lead to upward pressure on inflation, from building costs to damaged crops raising prices for staples like fruit and vegetables.”
The government had already booked $11.6 billion for disaster support over the forward estimates in its mid-year budget update, and Mr Chalmers said that was now expected to rise to at least $13.5 billion.
Trump tariff ‘resilience’
Mr Chalmers said Treasury modelling of the effect of Donald Trump’s steel and aluminium tariffs predicted the hit to GDP would be less than 0.02 per cent by 2030.
“But when you add in the indirect effects the hit could be more like 0.1 per cent,” he said.
“In fact, over a range of scenarios, Treasury found the indirect GDP impacts of a trade war could be up to four times larger than the direct effects of tariffs on our economy. In a world of retaliation and escalation, the impacts of tariffs are amplified, they linger for longer, resulting in a bigger reduction in GDP and a bigger increase in prices.”
Mr Chalmers said Australia’s response “will not be a race to the bottom on tariffs”.
“We will go for more resilience, not more retaliation, because more and higher tariffs will harm, not help our workers, our businesses, our industries and our economy,” he said.
Election policies TBA
There will be some mystery spending in the budget, too.
Due to the disruption of Alfred, many of Labor’s key election policies have already been announced, including $8.5 billion to Medicare to boost bulk-billing rates, $7.2 billion to upgrade Queensland’s Bruce Highway, $2 billion for Sunshine Station in Victoria and $1 billion for new rail links in western Sydney.
“This is more than we’d typically unveil before the budget,” Mr Chalmers said.
“There’ll be provisions in the budget for policies that we will announce in the campaign, not next week. All of this means that there will be fewer surprises this time around on budget night.”
Originally published as What we know so far about the federal budget
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