Federal Budget: Rise in business investment gives Jim Chalmers confidence over Future Made policies

Jim Chalmers’ confidence in the Government’s plans to attract massive amounts of private capital to critical minerals and other sectors vital to the global energy transition has been boosted by new forecasts showing six years of continuous business investment growth.

The Treasurer’s Budget handed down next Tuesday will forecast expected capital expenditure will grow to a record $187.6 billion in 2024-25.

Unlike the last spike in capex spending during the end years of the 2000s mining boom, this growth is largely driven by investment in non-mining projects.

They are forecast to increase to $137.3 billion for the next financial year, up from $118.3 billion in the first

Mining investment is also growing to levels not seen since the end of the mining boom, with $50.3 billion forecast over the next financial year.

The Government’s Future Made in Australia policy, which will be a centrepiece of the Budget, aims to use a mixture of measures such as financing, grants, loans and tax incentives to encourage huge private investment in clean energy technology and other growing areas.

The Treasurer said securing investment in these areas was vital to Australia’s growth over the longer term.

“Investment has recovered really strongly under Labor but we’re not complacent becaus much more will be needed to fund and finance the future,” Dr Chalmers said.

“A big focus of the budget will be on attracting private capital but also about how we better absorb and deploy it, which will include a focus on skills, approvals and our broader investment settings.”

The Budget papers will also contain upgraded its employment forecasts, showing the number of jobs is now expected to grow at 2.25 per cent in the year to the end of June.

As well as being much stronger than the 1.5 per cent growth forecast in the mid-year update, this is more than double the expectations included in last year’s Budget – despite the labour market softening in response to weaker economic growth.

Recent data has shown drops in hours worked and job vacancies coupled with a slight increase in the underemployment rate.

Nevertheless, the unemployment forecast remains unchanged from last year’s Budget and the mid-year update.

The unemployment rate is expected to tick up slightly to 4.5 per cent by the end of June 2025. It is currently at 3.9 per cent.

Dr Chalmers is hoping to post a second surplus in this Budget but his Finance Minister Katy Gallagher says the task has been made more difficult by the $15.4 billion in “unavoidable spending” to keep programs from falling off funding cliffs or properly finance projects.

This includes extending funding for health programs, buying more COVID vaccines, paying for the fit-out – not just the construction – of the Western Sydney airport, and boosting the number of staff at the Department of Home Affairs.

However, Senator Gallagher has also found $27.9 billion worth of cuts, some of which will be reprioritised to spend in other areas in the same portfolio.

The bulk of this is in Defence, where changing priorities means projects have been cut or delayed to make way for others.

“Australians expect a responsible government to identify sensible savings to reinvest in higher quality spending and keep existing programs in place to prevent any cuts to the services that Australians rely on,” Senator Gallagher said.