Finance Minister Katy Gallagher has refused to guarantee that the government will cut more than it spends in the upcoming mid-year budget update, despite inflation rising to 4.3 per cent and the Reserve Bank expected to lift interest rates on Tuesday. She said no portfolio would be protected from scrutiny, including Labor's electric vehicle tax concessions and household battery subsidies, which have faced criticism for disproportionately benefiting wealthier Australians.
The government is preparing its mid-year budget update amid persistent inflation and rising global borrowing costs that threaten to add billions more to its interest bill. Federal debt is forecast to climb beyond $1.2 trillion by 2030. Cumulative budget deficits of $150.5 billion are projected over five years.
Gallagher told ABC’s Insiders that the pressures on the budget are growing and that ministers are examining every program for savings. She said the government faces bigger challenges than any other this century, pointing to the National Disability Insurance Scheme, Medicare, aged care, defence, and interest payments on government debt as the biggest sources of pressure.
She defended the planned $250 working tax offset, due to take effect in July, saying it was already accounted for in budget forecasts despite persistent inflation. She insisted government spending was not the main cause of inflation, which rose to 4.3 per cent in the 12 months to September, but acknowledged the Commonwealth had a responsibility to help contain price pressures.
Following reports in this masthead of tensions between Prime Minister Anthony Albanese and Treasurer Jim Chalmers over the scale of spending restraint required, Gallagher dismissed suggestions of a serious rift, describing their relationship as “very professional and respectful”.
Shadow Treasurer Tim Wilson said the government could not kick its spending addiction. “For every $2 it saves, it goes on and spends an additional $3, and kicks on inflation and higher interest rates,” he said. “That’s why Australians’ mortgages cost more, and they’re paying more at the supermarket and getting less.”
Gallagher acknowledged the difficult choices, saying “I’ve got a role as finance minister to say no to a lot of people. ... Other ministers want to do more. I’ve got to find out: is there room to do that? More often than not, there’s not.”
Analysis
Why This Matters
- Budget pressures affect the government's ability to fund services and respond to economic challenges, with direct implications for cost of living.
- The refusal to guarantee a net spending cut suggests the government may continue to run deficits, adding to debt and potentially influencing interest rates.
- The mid-year budget update will reveal whether the government can balance competing demands for spending amid inflation and rising borrowing costs.
Background
The Australian government is facing persistent inflation at 4.3%, the highest in over a decade, and the Reserve Bank is expected to raise interest rates. Federal debt is forecast to exceed $1.2 trillion by 2030, with cumulative deficits of $150.5 billion over five years. Key spending pressures include the National Disability Insurance Scheme, Medicare, aged care, defence, and rising debt interest costs. The government is also implementing tax concessions for electric vehicles and battery subsidies, and a $250 working tax offset, which some critics argue benefit higher-income Australians disproportionately.
Key Perspectives
Katy Gallagher (Finance Minister): The government is facing bigger challenges than any this century and must examine every program for savings, but she refuses to guarantee a net reduction in spending, saying the budget must play a responsible role and that government spending is not the main cause of inflation.
Tim Wilson (Shadow Treasurer): The government cannot kick its spending addiction, saving only $2 for every $3 it spends, driving up inflation and interest rates, which hurt Australians' mortgages and cost of living.
What to Watch
- The Reserve Bank's interest rate decision on Tuesday and its impact on government borrowing costs.
- The mid-year budget update, expected to show updated deficit and debt projections.
- The outcome of the expenditure review committee meetings and any announced cuts.
Checked
12 claims in this story checked against 1 source: 12 supported.
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- SupportedGallagher described Albanese and Chalmers’ relationship as “very professional and respectful”.Sydney Morning Herald - Latest News: “Gallagher dismissed suggestions of a serious rift, describing the relationship between the two men as “very professional and respectful”.”
- SupportedWilson said: “For every $2 it saves, it goes on and spends an additional $3, and kicks on inflation and higher interest rates.”Sydney Morning Herald - Latest News: ““For every $2 it saves, it goes on and spends an additional $3, and kicks on inflation and higher interest rates,” he said.”
- SupportedWilson said: “That’s why Australians’ mortgages cost more, and they’re paying more at the supermarket and getting less.”Sydney Morning Herald - Latest News: ““That’s why Australian’s mortgages cost more, and they’re paying more at the supermarket and getting less.””
- SupportedGallagher said: “I’ve got a role as finance minister to say no to a lot of people. ... Other ministers want to do more. I’ve got to find out: is there room to do that? More often than not, there’s not.”Sydney Morning Herald - Latest News: ““I’ve got a role as finance minister to say no to a lot of people,” she said. “Other ministers want to do more. I’ve got to find out: is there room to do that? More often than not, there’s not.””
- SupportedGallagher refused to guarantee Labor would cut more than it spends in the upcoming budget update.Sydney Morning Herald - Latest News: “Finance Minister Katy Gallagher has refused to guarantee Labor will cut more than it spends in the upcoming budget update”
- SupportedInflation rose to 4.3 per cent in the 12 months to September.Sydney Morning Herald - Latest News: “inflation, which rose to 4.3 per cent in the 12 months to September”
- SupportedThe RBA was expected to lift interest rates on Tuesday.Sydney Morning Herald - Latest News: “With the Reserve Bank expected to lift interest rates on Tuesday amid stubborn inflation”
- SupportedGallagher said no portfolio would be protected from scrutiny, including Labor’s electric-vehicle tax concessions and household battery subsidies.Sydney Morning Herald - Latest News: “But she said no portfolio would be protected from examination as ministers prepared their spending proposals, including Labor’s generous tax concessions for electric vehicles and subsidies for household batteries”
- SupportedThe electric-vehicle concessions and household battery subsidies have faced criticism for disproportionately benefiting wealthier Australians.Sydney Morning Herald - Latest News: “subsidies for household batteries, which have faced criticism for disproportionately benefiting wealthier Australians.”
- SupportedRising global borrowing costs threaten to add billions more to the government’s interest bill.Sydney Morning Herald - Latest News: “Rising global borrowing costs threaten to add billions more to the government’s interest bill”
- SupportedFederal debt is forecast to climb beyond $1.2 trillion by 2030.Sydney Morning Herald - Latest News: “Federal debt is forecast to climb beyond $1.2 trillion by 2030”
- SupportedCumulative budget deficits of $150.5 billion are projected over five years.Sydney Morning Herald - Latest News: “cumulative budget deficits of $150.5 billion are projected over five years.”