The treasurer, Jim Chalmers, has declared next week’s budget neither the time for “scorched-earth austerity” nor for unrestrained spending as he hints again at a possible second consecutive surplus.
“The budget is in much better nick than the budget that we inherited almost precisely two years ago,” Chalmers said on Monday.
A week out from the government’s third budget, Chalmers and the finance minister, Katy Gallagher, insist it will contain more cost-of-living relief. But they are also trying to keep expectations in check, describing the already-announced tax cuts as the centrepiece.
“This is not the time for scorched-earth austerity,” Chalmers said on Monday. “It would not be wise when people are doing it tough and when the economy is soft for us to slash and burn in this budget.”
But equally, it would not be “some kind of free-for-all of spending”.
“We are charting a responsible middle path,” he said.
Chalmers suggested a second consecutive surplus was “in reach”.
“And if we achieve it, this will be – or this would be – the first back-to-back surplus in almost two decades,” he said.
The two ministers flagged what they called essential extra spending in areas they argue the previous government neglected. “Some extra spending is unavoidable, some of it is automatic, some of it is desirable, all of it is warranted,” Chalmers said.
Chalmers also warned that not all of the figures in next Tuesday’s budget papers would be rosy and some would be well in the red, compared with those in December’s mid-year economic and fiscal outlook (MYEFO). “Some of the deficits in the budget will be a little bigger than they were at MYEFO, some of them will be a little better,” he said.
Gallagher pointed to what she called “unavoidable spending” to scaffold important programs she said had been underfunded in the past. She listed IT upgrades – including measures to sustain the MyGov government online portal – and extra staff for Services Australia to help clear the backlog of claims, especially in Veterans’ Affairs.
“There’s a range of programs in Health through palliative care, cancer programs, public health chronic conditions funding,” she said. “Again, responsible, reasonable, needed investments … that didn’t have ongoing funding.”
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Also in that category was the “Leaving Violence” payment announced last week as the continuation of a pilot program introduced under the Morrison government. Gallagher said the previous government had not funded it beyond its initial two-year trial.
She also said some spending in other areas would be cut. “You will see savings in this budget,” Gallagher said. “They are getting harder to find – I don’t pretend otherwise. You know, we’re looking line by line. We look under each desk to try to see what we can find.”
Earlier on Monday the shadow treasurer, Angus Taylor, accused the government of being “addicted to spending”.
“This is why we’re hearing economists from many quarters coming out and saying they’ve got to stop the spendathon, they’ve got to contain the growth in spending,” Taylor told Sky News. “That will take pressure off this homegrown inflation – Labor’s homegrown inflation, which is hurting households.”
Chalmers said the government “won’t be taking lectures” from the Coalition “who left us debt and deficit as far as the eye could see”.
Ahead of this week’s two-day Reserve Bank board meeting to consider official interest rates, Chalmers warned that the budget’s forecasts next Tuesday would be different to those the RBA produces. The government’s forecasts would incorporate the likely impact of measures in the budget while the bank’s would not.