News Corp Australia reported on May 12 that Australian Finance Minister Jim Chalmers said that Australia's total debt is still expected to rise to more than 1 trillion Australian dollars, and the Albanese government is facing calls for further spending cuts to avoid exacerbating inflationary pressures.
Three days before the May 14 budget, the finance minister did not rule out an increase in total debt to more than $1 trillion, but he believed that Labour's economic credibility meant that Australia's debt was lower than it should have been.
Speaking to Sky News, Chalmers said: "We've saved a lot of debt by managing the economy more responsibly than our predecessors. ”
With strong commodity prices, near record lows in unemployment and a rapid improvement in the budget floor, Chalmers said taxpayers would save around $80 billion in interest expenses over the next decade as a result of the lower government debt.
"We've brought these debt levels down," he said...... That's about $150 billion less than what we inherited from our predecessors. ”
According to Budget 2023-24, total debt is expected to exceed $1 trillion in the year to June 2026.
(Image source: News Corp Australia)
The total debt reflects the amount of money owed by the government, primarily through the issuance of federally backed securities. Net debt is the sum of total debt minus its financial assets and is considered a better indicator of a government's ability to service its debts. According to the 2023-24 Budget, debt would climb to $575 billion for the current financial year by this figure.
Interest payments on government debt are the fastest-growing expense in the federal budget, as a surge in spending during the pandemic has led to record deficits, exacerbated by a sharp rise in global interest rates.
In an earlier interview, the Minister of Finance confirmed the cost of investments made by the Albanese government for paid parental leave plus pensions, which is set to enter into force on July 1, 2025.
Mr Chalmers said the initial cost of the measure would be $1.1 billion over the four-year look horizon, after which the annual cost would amount to $623.1 million. "It's a very important investment. When a mum or dad is on government paid parental leave, the pension should not be missed. ”
The annual cost of $623.1 million is significantly higher than the Treasury's estimate in 2020, when ongoing costs were expected to be $200 million per annum, but this calculation assumes a superannuation guarantee of 9.5% and paid parental leave of 18 weeks.
The increase in the pension guarantee (which will jump from 11.5% in the first year to 12% from July 2026) and the extension of the entitlement period (from the initial 24 to 26 weeks) make the cost of the policy much higher than initially thought.
(Image source: News Corp Australia)
Chalmers said the measure would particularly help women who had previously missed their pensions during parental leave. "We recognise that when people are making difficult choices about whether or not to have children, we need to support them by extending their pensions for paid parental leave."
On Friday, Chalmers, a father of three, said the budget would provide additional support to Australian families if they were willing to have more.
Australia's recent surge in population growth, driven by a surge in immigration, has become a hot political issue, with calls for the government to promote natural population growth rather than relying solely on international migration.
The Treasurer said other measures aimed at helping families included billions of dollars for early childhood education and care.
In response to calls for additional relief for motorists from the Albanese government, Chalmers said the budget would not "chase the rise and fall of gasoline prices" by temporarily cutting fuel excise taxes.
Instead, the focus will be on a range of other cost-of-living measures that are less of a drag on the budget bottom line.
(Image source: News Corp Australia)
The cost of petrol, a large part of household budgets, has risen sharply in recent weeks, with the national average retail price climbing to $2.07 per litre, according to the latest estimates from the Australian Petroleum Institute.
The surge in oil prices pushed headline inflation to 3.6% year-on-year in March, reducing the likelihood of a rate cut before 2025.
Last week, RBA Governor Michele Bullock warned that high fuel costs would be the main driver of higher price pressures in the coming months, with petrol stations showing little sign of relief. "Inflation forecasts in the near term will be largely driven by gasoline prices."
Crude oil prices remain high and are currently around $83 per barrel due to growing global demand and OPEC+ production cuts, as well as a lack of competition between gas stations.
In September 2022, Labour's policy of allowing a 22 cent gasoline GST break expired on the grounds that the measure would cost the budget up to $1 billion a month.
Shadow Treasurer Angus Taylor (Image: News Corp Australia)
Shadow Treasurer Angus Taylor believes that if Tuesday's federal budget fails to curb inflation, Australians will eventually experience an escalation of cost-of-living pressures.
Taylor called on the Treasury Secretary to reduce spending by reinstating the fiscal guardrails adopted by former Treasury Secretary Peter Costello during the Howard administration. "To do this, they must re-establish the fiscal rules that Peter Costello instituted in the 1990s to achieve a structural budget balance that ensures that the economy grows faster than it spends."
"It's not what we've been seeing...... We recommend that these rules be reinstated. This is a very important policy change. The Labour Party abolished these rules when it came to power. ”
According to Taylor, Chalmers' previous two budgets have failed to ease inflationary pressures.
"They didn't meet their inflation reduction target, and by the way, the RBA Governor described the inflation that occurred during the Labor Party as 'homegrown inflation'. If the budget fails again, Australians will pay a high price. ”
Taylor blamed the Albanese government for spending an additional $209 billion since taking office, much of which includes indexation fees paid by the government.