In delivering the budget on Tuesday night, Treasurer Chalmers proudly declared that the government has engineered the largest fiscal turnaround in a single term, with this year's budget $207 billion better than what it inherited.
"In our first 2 years, we posted the first back‑to‑back surpluses in nearly 2 decades," Chalmers said, underscoring the government's fiscal prowess.
"Our deficit this year has almost halved since we came to office," he added, with the $27.6 billion deficit for 2024–25 coming in at nearly half the level predicted in the PEFO.
“Next year’s deficit is $42 billion, lower than what was forecast at the last election, and lower than at the mid‑year update,” he said.
Gross debt is set to reach $940 billion this financial year, $177 billion less than the inherited level, saving around $60 billion in interest costs over the decade, Chalmers said.
According to budget papers, gross debt is projected to top $1 trillion for the first time in 2025-26. As a share of the economy, it is expected to peak at 37.0 per cent of GDP in 2029–30, before declining to 31.9 per cent of GDP by 2035–36.
The government attributes what it perceives as fiscal gains to responsible economic management, combining spending restraint, savings measures, and banking revenue upgrades.
Since taking office, the government, Chalmers said, has identified $94 billion in savings, including an additional $2 billion in this budget.
Around 70 per cent of tax receipt upgrades have been banked, with structural improvements made across the NDIS, aged care, and interest costs.
Looking ahead, Chalmers said key priorities for the Labor government include tackling inflation, rebuilding living standards, and leveraging national strengths for future growth.
Budget papers confirmed inflation has moderated substantially across both headline and underlying measures, with inflation now expected to be 2.5 per cent by the middle of this year, 0.25 of a percentage point lower than forecast at MYEFO.
"Excluding the impact of fuel and energy rebates, inflation is expected to sustainably be in the RBA’s target band around the middle of 2025, earlier than the end of the year expected at MYEFO," budget papers read.
Real GDP is forecast to grow by 1.5 per cent in 2024–25, 2.25 per cent in 2025–26 and 2.5 per cent in 2026–27.
Five key priorities
The budget is built around five main priorities: easing the cost of living, strengthening Medicare, increasing housing supply, investing in education at all levels, and making the economy more productive and resilient.
On the latter point, Chalmers said: “This is one way to ensure Australians can be primary beneficiaries of the churn and change we see around the world.
“Another is by investing in our competitive advantages. Or by looking for opportunities to join with our partners in new, resilient supply chains. By becoming an indispensable part of the net zero economy. By preparing our people to adjust to and succeed in the new world being created in front of us. By building a Future Made in Australia.”
The budget also confirmed tax cuts of $17.1 billion over five years in what is Labor's final major spending measure before polling day.
The government said the combined tax cuts would allow people to keep more of what they earn, "boosting nominal household disposable income by 1.9 per cent by 2027–28".
Future Made in Australia
The Treasurer unveiled a plan to drive long-term productivity growth.
“Our plan for productivity growth doesn’t mean making Australians work longer for less,” he said. “It’s about investing in our people and doing more to unlock our potential by boosting dynamism and competition.”
A key part of this is its "Future Made in Australia" agenda, aimed to position the nation to navigate five major global shifts: the move from globalisation to fragmentation, the transition from hydrocarbons to renewables, the rise of AI, an ageing population, and changes to the industrial base.
“All this puts a premium on resilience,” the Treasurer stated. “That’s what a Future Made in Australia is about.”
As part of this strategy, the budget includes over $3 billion to support the production of Australian-made green metals such as aluminium and iron. This builds on recently legislated tax incentives for critical minerals and green hydrogen.
The government is also backing clean technologies through its Future Made in Australia Innovation Fund and a recapitalisation of the Clean Energy Finance Corporation. These initiatives aim to develop clean energy manufacturing, green metals, and low-carbon liquid fuels, while unlocking private investment.
“Our future growth prospects lie at the intersection of our industrial, resources, skills, and energy bases, and our attractiveness as an investment destination,” the government said. “So we can grasp the jobs and opportunities of the net zero transformation.”
Defence in the spotlight
The government also highlighted the growing link between economic security and national security, emphasising its commitment to stability in the region by supporting banking services in the Pacific.
As part of efforts to bolster Australia’s security, the government has committed an extra $50.3 billion in defence spending by the mid-2030s, ensuring that defence funding will exceed 2.3 per cent of GDP by the early 2030s.
Additionally, $45 million is being invested in the government’s initial response to the 2024 Independent Intelligence Review.
