Energy price sweetener on cards for Albanese re-election plan

Voters are on track to be offered billions of dollars in energy relief in the run-up to next year’s federal election as Treasurer Jim Chalmers seeks to prevent a large increase in electricity bills that would add to inflation pressures.

While ruling out major policies in the looming mid-year budget update, due to be released in the coming days, Chalmers noted on Thursday that the government had previously found space in the budget to deliver cost-of-living relief and could do so again.

Treasurer Jim Chalmers may be able to make space in next year’s budget or election campaign to promise an extension of energy subsidies which are keeping a lid on power prices.Credit: Peter Rae

Under pressure over the state of the economy after this week’s national accounts revealed the largest fall in Australians’ living standards on record, Chalmers is expected to confirm in the mid-year update a slide in the state of the nation’s finances.

After delivering the first back-to-back budget surpluses in 15 years, the treasurer is likely to forecast a deficit this financial year of more than $30 billion and another of more than $40 billion in 2025-26.

This year’s budget contained energy subsidies to households and businesses that have helped bring down bills. Household spending on energy alone fell by more than $800 million in the September quarter due in large part to the subsidies, which are due to end with the financial year.

The subsidies are also one of the reasons inflation has fallen to 2.8 per cent. But once the subsidies end, inflation is expected to jump by at least half a percentage point.

Extending the subsidies would cost the budget about $3.5 billion. About $2.6 billion of that would hit the 2025-26 budget.

Chalmers said the government’s actions, including through energy relief, had eased the cost of living for millions of Australians.

“What we’ve shown in our first three budgets is a willingness to make room in those budgets to help people who are under pressure,” he said.

“From budget to budget and update to update, we work out the best and most responsible way we can support people doing it tough.

“People shouldn’t expect the mid-year update to be some sort of mini-budget with a lot of initiatives. We are working on a budget for March, not long after the mid-year update and … we’re always looking for responsible ways to help people where we can.”

Chalmers also revealed the coming budget update would show a rise in spending on veterans’ affairs and Medicare.

The government has used an increase in public servant numbers to clear a huge backlog in assessing health claims from veterans left by the Morrison government. Chalmers said as the claims had been processed faster than anticipated, there would be “billions of extra dollars” spent on helping veterans.

He said there had also been a rise in medical assistance through Medicare, which would add to spending in the budget update.

Opposition Leader Peter Dutton said the government’s policy agenda was contributing to the nation’s slow economic growth and stubborn inflation.

He likened it to the Whitlam era of the 1970s, when government spending, plus the first oil shock of the decade, contributed to a surge in prices and wages.

“The Reserve Bank governor has made it clear the government continues to spend money in a wasteful way and that’s holding up inflation for longer,” he said while campaigning on the NSW Central Coast.

“That’s why interest rates will stay higher for longer, even though they’ve gone down in the United States, in New Zealand, in Canada, and I think there is a much better way.”

Pressed on whether he would go to the election promising to continue the government’s energy rebates, Dutton said he would “look at what the government is proposing”.

Dutton is soon expected to announce his spending plans for a series of government-financed and owned nuclear power plants across the country.

On Thursday, he said a Coalition government would “rip up” contracts signed for offshore wind turbines.

There are some signs that consumers may be over the worst of the recent downturn in the economy, with figures from the Australian Bureau of Statistics showing a 0.8 per cent increase in spending through October. That followed a 0.2 per cent drop in September.

The bureau noted a substantial rise in spending on recreation and cultural events as consumers snapped up tickets for the reunion tour of British band Oasis and next year’s Melbourne Grand Prix.

The national accounts showed household spending through the September quarter was flat as people saved stage 3 tax cuts and a rise in overall wages.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.