Australia's budget is set to dip deeper into the red over the next four years, with deficits expected to grow as government spending continues to outpace revenue.
Treasurer Jim Chalmers outlined the bleak outlook while presenting the Mid-Year Economic Fiscal Outlook (MYEFO) today, explaining that much of the spending is "unavoidable."
This year’s deficit stands at $26.9 billion, which Chalmers described as "a little bit smaller than expected." However, over the next four years, the combined deficit is forecast to swell to $143 billion—$21.8 billion worse than what was projected in the federal budget earlier this year.
Chalmers, alongside Finance Minister Katy Gallagher, attributed $8.8 billion of the new spending to urgent priorities, including infrastructure projects and domestic violence prevention initiatives.
“We’ve made a lot of progress,” Chalmers said. “The economy is growing, but slowly, and we’re on track for a soft landing.” He also noted that Australia’s gross debt remains comparatively lower than other countries, but acknowledged that the rising interest on this debt is a significant concern.
Gallagher added that the budget slippages are due to pressing and automatic spending needs. “Unavoidable spending makes up half of the MYEFO decisions,” she said.
Net debt is forecast to climb from $940 billion this year to a staggering $1.6 trillion by the 2027/28 financial year. Chalmers emphasized the impact of interest payments on this debt, pointing out how these funds could be better used elsewhere.
"There are much better ways to spend billions of dollars than on debt interest," he said, highlighting the government’s efforts to manage and reduce this burden.
Interestingly, the budget includes a mystery $5.5 billion allocated to yet-to-be-announced initiatives.
As part of the government’s priorities, Chalmers said cost-of-living relief remains a focus. Measures like energy bill assistance, cheaper medicines, early childhood education, rent relief, and student debt reductions aim to ease pressure on households.
Despite the growing deficit, Chalmers defended the budget, calling it a “responsible set of books” as the government gears up for the federal election next year.
The forecast of deficits comes after two consecutive years of surpluses in 2022/23 and 2023/24.
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