BUDGET FLAGS TAX DEBATE; DEBT ON RISE
Treasurer warns of tough talk on budget reforms
Federal Treasurer Jim Chalmers has used his first Budget speech to flag major reforms to restore the nation’s fiscal buffers amid the challenges of soaring energy prices and rising inflation. Dr Chalmers delivered a 2022-23 Budget that forecast a deficit of $36.9 billion, a sharp drop in future economic growth and a peak inflation rate of 7.75 per cent by the end of this calendar year. He said real growth in spending would be flat - around 0.3 per cent per year over the forward estimates. But the Treasurer warned that Australia needed a “more sustainable” budget, with “hard decisions” to be made if future spending commitments were to be met. That warning signals a major debate on taxation reforms that would boost long-term revenue.
Debt, spending challenge Budget, but Defence pledge kept
Australia’s energy exports during a period of soaring global demand have helped to trim the nation’s budget deficit, originally predicted in March to hit $78 billion in 2022-23. But major cost pressures are forecast to escalate once commodity prices and demand ease. The Treasurer said that while the level of gross debt would fall to around 37.3 per cent of GDP (from 42.5 per cent forecast in March), the borrowing costs on debt would rise by 14 per cent a year over a decade. Budget papers therefore project that gross debt would rise to almost 47 per cent of GDP by 2032-33. Other areas of service delivery, such as aged care and disability services, would also face sharp spending pressures, but the Treasurer said Defence would remain well-positioned to meet security challenges; annual defence spending would go beyond the commitment of two per cent per GDP over the forward estimates.
Review into NDIS as costs soar
Ahead of the Budget, the Federal Government launched an independent review into the National Disability Insurance Scheme (NDIS) to ensure its long-term future. NDIS Minister Bill Shorten said the announcement fulfilled Labor’s election commitment to review the scheme’s design, operation and sustainability. He said the NDIS was forecast to cost an extra $8.8 billion over four years from 2022-23, soaring to an annual forecast cost of $50 billion by 2025-26. The NDIS review will report to the government within 12 months.
Federal funds for Tasmanian energy upgrade
In a major plank of its renewable energy strategy, the Albanese Government has signed a partnership with the Tasmanian Government to deliver electricity to the mainland via the Marinus Link transmission project. The project comprises two under-sea transmission cables between Tasmania and Victoria, and is costed at $3.8 billion. About 80 per cent of the project costs will be debt-funded through the Clean Energy Finance Corporation, with the remaining 20 per cent an equity partnership between the Commonwealth, Tasmania and Victoria. Up to $1 billion will also be available to fund Tasmania’s Battery of the Nation projects. Tasmania has a 200 per cent renewable energy target, thanks to its extensive hydro generation.
Australia, Japan strike agreement on defence, cyber co-operation
Australia and Japan have reinforced their commitment to closer defence and security ties, signing a landmark Joint Declaration on Security Cooperation. Meeting with Japanese Prime Minister Fumio Kishida, Anthony Albanese said the agreement recognised the contemporary security context, and would expand and strengthen co-operation across areas including defence, intelligence-sharing, energy transition and maritime security. It also foreshadowed closer co-operation on defence capabilities, and more sophisticated training between defence forces. In a separate statement, the two national leaders pledged deeper co-operation on cyber-security and cyber resilience, and announced a critical minerals partnership to ensure Japan had adequate supply of critical minerals for its advanced manufacturing industry.