Chalmers will note the jobs market has been one of the sources of the biggest upgrades to the budget. At the end of last year,14.2 million Australians were in work,about 500,000 more than Treasury had forecast before the 2022 election.
“We welcome this,but we don’t expect to get such upside forecast surprises this time around,” Chalmers will say.
In its latest mid-year budget update,the government forecast a deficit of $1.1 billion for the current financial year and an $18.9 billion shortfall in 2024-25. Those forecasts were major improvements on expectations in May when the deficit was tipped to be $13.9 billion this year and $35.1 billion next year.
This masthead last weekrevealed tension within the ministry about the efforts by Chalmers and Finance Minister Katy Gallagher to restrict new spending.
Chalmers will say global uncertainty,persistent cost-of-living pressures and slowing growth meant a focus on restraint would remain central to the budget.
“There will still be a premium on what’s responsible,affordable,meaningful and methodical,” he will say.
“There will still be a primary focus,but not a sole focus,on inflation.”
The economic headwinds facing the treasurer are evident in the latest measure of household spending by the Commonwealth Bank,which showed a 0.3 per cent drop through February.
The bank’s figures,collated from its network of credit and debit cards and home lending data,showed a 1.9 per cent drop in spending on household goods,a 1.6 per cent fall in transport,a 0.5 per cent slip in food and beverages and a 0.5 per decline in education.
There were some increases,led by 0.8 per cent lift in spending on utilities and a 0.6 per cent jump in health. The impact of Taylor Swift’s tour was also evident,with spending at music festivals jumping 76 per cent while there was a 115 per cent jump in spending at function and event centres.
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The Commonwealth Bank’s chief economist,Stephen Halmarick,said while people had prioritised seeing Swift and other headline concerts,it wasn’t enough to offset the general weakness in spending across the rest of the economy.
“It’s important to note the annual rate of increase of the index has fallen to 3.5 per cent,which is close to flat in real terms when an inflation rate of 3.5 to 4 per cent is taken into account,” he said.
“We expect to see continued softening of household spending in the near term as the November 2023 interest rate hike takes hold,which together with decelerating inflation supports our view that the Reserve Bank can commence official interest rate cuts in September this year.”