Budget will have ‘substantial’ cost-of-living relief – but don’t expect a spending spree, says Chalmers

Treasurer Jim Chalmers has hosed down expectations of a blitz of new policies in next week’s budget, except substantial cost-of-living relief to cash-strapped voters, while revealing money will be stuffed away for election campaign promises.

In an address to the Queensland Media Club on Tuesday, Chalmers, who is due to present the federal budget on March 25, flagged any increases in the cash flowing into the government’s chest would be one-sixth of the average of the Albanese government’s past updates.

Treasurer Jim Chalmers said there would be “meaningful and substantial” cost-of-living relief in the upcoming budget but remained coy on the details. Credit: Alex Ellinghausen

Since unveiling a revenue upgrade of $144 billion over four years in October 2022, the Albanese government’s upward revisions have tapered off as the economy has slowed, and commodity prices have eased.

Chalmers also tempered expectations of a spending spree in the budget, saying there would not be many surprises.

“There’ll be provisions in the budget for policies we will announce in the campaign, not next week,” he said. “All this means there will be fewer surprises on budget night.”

However, he said there would be “meaningful and substantial” cost-of-living relief to be revealed over the next week.

In last year’s budget, Chalmers revealed $300 electricity subsidies for households and $325 for small businesses, at a total cost of $3.5 billion.

The Albanese government had planned to call the election without delivering a budget, but it was delayed by Cyclone Alfred’s landfall on March 7.

The budget will be delivered just before US President Donald Trump decides which new tariffs to impose from April 2, following the tariffs of 25 per cent imposed last week which hit all imports of Australian aluminium and steel.

Chalmers said this “new world” of global uncertainty was threatening America’s economy.

“The risk of recession in the world’s largest economy is rising. All this has a consequence for us,” he said.

Some of those consequences are already being felt. The ANZ-Roy Morgan measure of consumer confidence dropped 3.1 points over the past week, falling to its lowest level since October 2024.

ANZ economist Sophia Angala said Cyclone Alfred delivered a hit to consumer confidence in Queensland, but global trade uncertainty was weighing on sentiment across the country.

Jim Chalmers talks weather with the army after the cyclone.Credit: Newswire/Pool

Reserve Bank chief economist Sarah Hunter told the Australian Financial Review’s banking summit in Sydney on Tuesday that US policy settings – and their impact on the global economy and Australian activity and inflation – were front-of-mind for the bank.

“We have been using scenarios, analysis and judgement to assess the policy implications,” she said.

Shadow treasurer Angus Taylor, in an interview on 2CC Canberra, said Chalmers would be trying to shift blame when he presents the budget next week.

“I’ll tell you what we will see, is lots of excuses, no plan,” he said. “Jim Chalmers looking for anyone to blame for his complete failure.”

ANZ’s head of Australian economics Adam Boyton on Tuesday said he expects Chalmers to unveil a $20 billion deficit for the current financial year and a $40 billion shortfall for 2025-26.

Over the four years forecast in the budget, the cumulative improvement would be about $20 billion.

Boyton said stronger economic growth and the strong jobs market would deliver extra income to Chalmers, but he will spend some of that extending cost-of-living measures, lifting expenditure on defence and increasing resources in the health sector.

He said the lift in spending, which would equate to between 0.25 per cent and 0.5 per cent of GDP, would not trouble the Reserve Bank.

“Such an amount would have no material impact on our growth, inflation or RBA forecasts,” Boyton said.

Deloitte Access Economics partner Stephen Smith said he expected the budget to reveal revenue downgrades of $11.3 billion over four years and an underlying cash deficit of $26.1 billion – slightly smaller than forecast in the government’s last budget update.

However, he said the longer-term deterioration of the budget bottom line should be a “reality check for politicians wanting to announce election sweeteners in the weeks ahead.”

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