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Treasurer outlines 5 key changes to May budget

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Treasurer Chalmers has outlined the government’s budget approach as it seeks to navigate the challenges posed by inflation while striving for a second surplus.

While inflation will remain a focal point in Labor’s third budget, Jim Chalmers emphasised that it’s no longer the sole concern, highlighting the need for sustainable economic growth.

Detailing the government’s approach to its third budget, one that is being drafted in slightly different economic circumstances, Chalmers said, “our economic strategy will change a little but not a lot”.

“As we fight inflation, build our defences against global uncertainty, and adapt to slowing growth in our economy, our overarching objectives are clear, consistent and continuing,” Chalmers said.

These objectives include modernising the economy and maximising opportunities to benefit middle Australia, ensuring that Australians and local industries are the major beneficiaries of the big changes underway in both the society and the economy, as well as delivering near‑term relief and longer‑term reform.

Here are five key changes outlined in his address at a CEDA event on Thursday:

Moderated revenue upgrades: Chalmers revealed that revenue upgrades will be more conservative than the initially projected $69 billion over four years, citing the decline in the price of iron ore and thermal coal prices.

Moreover, with the labour market showing signs of softening, the government anticipates fewer substantial revenue upgrades compared to previous years.

“In each of our first two budgets, we benefited from more than $100 billion in revenue upgrades. This year, we won’t see anything like that,” the Treasurer said.

“In fact, we are even looking at much less than the $69 billion we booked in the latest mid‑year budget update.”

Prudent fiscal management: The Treasurer acknowledged a shift in approach, indicating that the government won’t rely as heavily on revenue windfalls as it has in previous budgets. Despite this, Chalmers affirmed the commitment to harnessing available resources effectively.

In our first two budget we banked 92 per cent and 82 per cent of upgrades, respectively ... So we are still committed to banking as much as we can, and the average amount we will bank since coming to government will still be much higher than it has been in recent history.”

Strategic investments: The budget will allocate significant funds towards defence, paying the super guarantee on paid parental leave, substantial investments” in remote housing as part of closing the gap, and the next steps in the government’s Southeast Asia strategy.

Additionally, measures aimed at reducing compliance costs for businesses by abolishing almost 500 “nuisance” tariffs and the cost-of-living tax cuts announced in January will be included.

“These are the sorts of things you’d usually hear about on budget night. I’m proud of each initiative and pleased they are already out there,” Chalmers said.

“But it means more in the lead‑up to budget and less on budget night, and it means we have to find room for it all at the same time as we seek to land a second surplus.”

Balanced cost-of-living measures: The Treasurer announced additional support to address rising living costs but said it won’t be anywhere near the magnitude of those tax cuts”. Instead, the government plans to implement targeted, responsible, and affordable measures, steering away from large cash handouts.

“We are already providing a tax cut to every taxpayer, and a bigger tax cut to more workers, we need to be upfront and say that any additional help will only be a fraction of that,” Chalmers said.

“Anything that’s too costly, too splashy, risks undoing the good progress we’ve made together on inflation,” he added.

Emphasis on sustainable growth: Highlighting the importance of sustainable economic expansion, Chalmers likened the government’s approach to a balanced diet, emphasising protein over carbs. The budget will place a significant emphasis on bolstering the foundational elements and drivers of growth, promoting a future made in Australia” and the energy transformation.

The government will also invest in “a human capital base capable of adapting and adopting technology and catching up and keeping up with changing workplace needs”, as well as “a bigger emphasis on women, wages, and workers in the care economy”.

“And perhaps, most of all, a big new focus on investment.

“We’re pleased that business investment has grown every quarter of our government after it fell around two‑thirds of the time under our predecessors.”

Noting that the future is a little less certain and a little less predictable, Chalmers said: “We can attract investment but we need to be able to absorb it too”.

“If we attract it better, and absorb it better, this will help drive growth in our economy in a world of churn and change.

“That’s why I’m working with my colleagues on a whole‑of‑government investment strategy, with the budget in mind.”

The budget will be announced on 14 May.

Ultimately, the Treasurer said, the government’s goal is to “put good economics before electoral politics” in the last year of its term.

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic

Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.