Australia flags A$20 billion savings as budget strains grow

[SYDNEY] Australia will book A$20 billion (S$17.2 billion) in savings in Wednesday’s (Dec 17) mid-year budget update as the government works to offset rising spending pressures, Treasurer Jim Chalmers said.

The update “won’t be a mini budget,” but will show the government is “all about delivery, responsibility and restraint,” Chalmers told reporters on Sunday. The budget faces “about A$35 billion” in extra costs – roughly A$25 billion once Australia’s goods-and-services tax is removed – due to natural disasters, the age pension, veterans’ payments and military retirement expenses.

Chalmers said he and Finance Minister Katy Gallagher have worked to absorb those costs without letting the budget slip. The government has now identified “A$114 billion in savings and reprioritizations” across seven updates since 2022, he said. The update will include provisions for a A$23 billion hospital-funding offer to the states, which Chalmers said will put “very substantial pressure” on the budget over coming years.

Australia has already ruled out extending electricity bill rebates, a measure the government says was never designed to be permanent. Chalmers said the update will show a shift towards longer-term cost-of-living support delivered through the tax system, as well as funding for housing, mental health, infrastructure, skills programmes and “100,000 new homes for first home buyers.”

A new law targeting supermarket “price gouging” and a mandate requiring the grocery chains and fuel retailers to accept cash will come into effect next year, Chalmers said. The payment rule is intended to ensure people who “want to or need to use cash” can continue to do so, he said. BLOOMBERG