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| Chalmers upbeat on eve of budget despite grim debt outlook and jitters over Australia’s ‘fiscal firepower’ | Chalmers upbeat on eve of budget despite grim debt outlook and jitters over Australia’s ‘fiscal firepower’ |
| (about 11 hours later) | |
| Tuesday’s budget will show Labor’s back-to-back surpluses giving way to a decade of deficits | Tuesday’s budget will show Labor’s back-to-back surpluses giving way to a decade of deficits |
| Australia’s debt burden will continue to grow in this financial year, Treasury has confirmed, even as Jim Chalmers claimed credit for the country’s much stronger fiscal position than was predicted leading into the last election. | Australia’s debt burden will continue to grow in this financial year, Treasury has confirmed, even as Jim Chalmers claimed credit for the country’s much stronger fiscal position than was predicted leading into the last election. |
| On the eve of Labor’s fourth budget, the latest official estimates show gross debt – or the outstanding face value of commonwealth government bonds – will climb from $906.9bn in 2023-24 to $940bn in 2024-25. | On the eve of Labor’s fourth budget, the latest official estimates show gross debt – or the outstanding face value of commonwealth government bonds – will climb from $906.9bn in 2023-24 to $940bn in 2024-25. |
| The updated figure for this financial year, to be revealed in Tuesday’s budget papers, matches the forecast in December’s mid-year update. | The updated figure for this financial year, to be revealed in Tuesday’s budget papers, matches the forecast in December’s mid-year update. |
| They will show the national debt pile will have grown by about $45bn under the Albanese government’s first term, from $895.2bn in mid-2022. | They will show the national debt pile will have grown by about $45bn under the Albanese government’s first term, from $895.2bn in mid-2022. |
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| After Anthony Albanese on Sunday announced $1.8bn for another $150 in energy bill relief for households and small businesses, Tuesday’s budget will also show Labor’s back-to-back surpluses giving way to a decade of deficits. | After Anthony Albanese on Sunday announced $1.8bn for another $150 in energy bill relief for households and small businesses, Tuesday’s budget will also show Labor’s back-to-back surpluses giving way to a decade of deficits. |
| Chalmers at the weekend said “it remains to be seen” when the budget returns to the black and the grim outlook suggests debt will continue to grow over coming years as governments borrow to plug the gap between spending and revenue. | Chalmers at the weekend said “it remains to be seen” when the budget returns to the black and the grim outlook suggests debt will continue to grow over coming years as governments borrow to plug the gap between spending and revenue. |
| Despite the upward debt trajectory since Labor took office in May 2022, Chalmers highlighted how the pre-election fiscal outlook in 2022 predicted gross debt would have blown out to $1.1tn by mid-2025 – or $177bn more than the budget will forecast on Tuesday. | Despite the upward debt trajectory since Labor took office in May 2022, Chalmers highlighted how the pre-election fiscal outlook in 2022 predicted gross debt would have blown out to $1.1tn by mid-2025 – or $177bn more than the budget will forecast on Tuesday. |
| The better-than-anticipated outcome is the result of Treasury officials in 2022 massively underestimating the strength of the post-lockdown economic recovery and failing to factor in booming commodity prices. | The better-than-anticipated outcome is the result of Treasury officials in 2022 massively underestimating the strength of the post-lockdown economic recovery and failing to factor in booming commodity prices. |
| The Albanese government then chose not to spend the vast majority of these windfall revenue gains. | The Albanese government then chose not to spend the vast majority of these windfall revenue gains. |
| Unveiling the latest debt forecast, Chalmers said “in less than three years, we’ve turned two big Liberal deficits into two Labor surpluses, shrunk this year’s deficit, and reduced Liberal party debt by $177bn”. | Unveiling the latest debt forecast, Chalmers said “in less than three years, we’ve turned two big Liberal deficits into two Labor surpluses, shrunk this year’s deficit, and reduced Liberal party debt by $177bn”. |
| “Together we’ve shown you can make progress on inflation without sacrificing jobs, which is remarkable compared to what we’ve seen around the world. Inflation is down, real wages and living standards are growing again, unemployment is low, debt is down, interest rates have been cut and growth is rebounding solidly,” the treasurer said. | “Together we’ve shown you can make progress on inflation without sacrificing jobs, which is remarkable compared to what we’ve seen around the world. Inflation is down, real wages and living standards are growing again, unemployment is low, debt is down, interest rates have been cut and growth is rebounding solidly,” the treasurer said. |
| “We’ve made a lot of progress together, the budget is in much better nick now than when we inherited it, but there’s more work to do.” | “We’ve made a lot of progress together, the budget is in much better nick now than when we inherited it, but there’s more work to do.” |
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| Borrowing under the Albanese government pales in comparison with the big-spending final term of the former prime minister Scott Morrison. | |
| The previous Coalition government borrowed $350bn in the three years to 2022 to pay for the huge Covid-era support programs. This included the $89bn jobkeeper program – one of the largest fiscal interventions in Australian history. | |
| Australia’s debt has grown substantially since the turn of the century, rising from the equivalent of 9% of GDP in mid-2001, or $66bn, to reach 34% of GDP as at June 2024. | Australia’s debt has grown substantially since the turn of the century, rising from the equivalent of 9% of GDP in mid-2001, or $66bn, to reach 34% of GDP as at June 2024. |
| While the trajectory of Australia’s debt broadly reflects deteriorating fiscal health, we owe substantially less than most other advanced economies. | While the trajectory of Australia’s debt broadly reflects deteriorating fiscal health, we owe substantially less than most other advanced economies. |
| The OECD says total debt as a share of the combined output of its 38 member countries was 84% in 2024, according to recent research from the Paris-based body. | The OECD says total debt as a share of the combined output of its 38 member countries was 84% in 2024, according to recent research from the Paris-based body. |
| Still, experts remain worried that future governments will lack the “fiscal firepower” to respond to future threats that require a big lift in spending, such as seen during the GFC and pandemic. | Still, experts remain worried that future governments will lack the “fiscal firepower” to respond to future threats that require a big lift in spending, such as seen during the GFC and pandemic. |
| “This comes at a time when growing geopolitical uncertainty, increasing trade tensions, more frequent weather events and ongoing technological change may mean shocks are more frequent,” the head of business and industry economics at Westpac, Sian Fenner, said. | “This comes at a time when growing geopolitical uncertainty, increasing trade tensions, more frequent weather events and ongoing technological change may mean shocks are more frequent,” the head of business and industry economics at Westpac, Sian Fenner, said. |