Chalmers said infrastructure projects promised by the previous government might be axed as Labor sought to bring some “scrutiny” to the budget.
“We want Treasury and Finance to go through the budget line by line. We want to separate the commitments that might be worthwhile and useful from those that might not and we may,like we have with Hell’s Gate,have to push back the timing of some projects,” he said.
Kennedy’s briefing to Chalmers was expected to cover the budget and economic issues that would face the incoming government.
A growing issue within Treasury is Australia’s ongoing poor productivity performance,which has fallen short of department forecasts for almost as long as its wage growth predictions.
Another problem is that several key economic forecasts underpinning the March 29 budget have proved to be overly optimistic.
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In the budget,Treasury forecast inflation at 4.25 per cent in 2021-22 and then 3 per cent next financial year. Wages were expected to grow by 2.75 per cent this financial year and step up to 3.25 per cent in 2022-23.
But inflation,currently at 5.1 per cent and tipped by the RBA to reach 6 per cent by year’s end,is running much faster than expected.
Household consumption,which underpins 60 per cent of the economy,is now forecast by the RBA to run slower than Treasury had predicted in the budget.
The budget bottom line is being buoyed by the high prices for key Australian commodities including iron ore,coal and some agricultural goods. In the budget,Treasury estimated if iron ore and coal prices remained elevated for just another six months,they would deliver an additional $29.5 billion in revenue to the budget over the next three years.
On the other side of the ledger,however,the budget’s interest costs are climbing much more rapidly than even expected in March.
Chalmers said cost-of-living pressures had been a key part of Labor’s election victory as they were the largest domestic issue facing the new government.
“I think the combination of inflation and wages growth is really the defining challenge that we are inheriting,” he said. “I think the international outlook will obviously be a major issue.”
Australian Chamber of Commerce and Industry chief executive Andrew McKellar said the new government would have to work quickly to address issues such as the nation’s “acute” labour and skills shortages.
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He also backed Labor’sproposed employment summit.
“Bringing unions and employer groups together in a collaborative manner will be an important opportunity to reform our ailing enterprise bargaining system,bolstering productivity and driving higher wages growth,” he said.
Chalmers said he would work closely with incoming prime minister Anthony Albanese and Labor’s employment minister on the outline of the summit,adding it would be more than just a discussion about the labour market.
Issues such as wage stagnation and gender roles within the jobs market would be part of the agenda.
“The focus of the summit will be broader than just the labour market. It has to be,” he said.
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