Federal Government finds $14.6 billion for Budget, not enough to cover $25.1 billion in unavoidable spending

Jim Chalmers and Katy Gallagher have found another $14.6 billion to cut or shift around within the Budget — but that is not enough to cover for an extra $25.1 billion in “unavoidable” and “automatic” spending.

The sobering figures can be revealed with the Federal Treasurer and Finance Minister foreshadowing a gloomy set of numbers in Wednesday’s mid-year budget update with an expected deeper deficit amid write-downs to revenue forecasts.

But despite a $100b drop in exports and corresponding $8.5b hit to company tax coffers over the next four years, Dr Chalmers continues to be optimistic about the future of Western Australia’s resources sector.

The Government is attributing the bulk of the fall to the slowdown in China’s economy.

“This is a particularly slow and soft period in the Chinese economy, and even with the very welcome announcements made by the administration about efforts to boost growth, we still expect growth in the Chinese economy to be quite weak and that’s played out in our expectations of mining exports, company taxes and the like,” Dr Chalmers said.

Nevertheless, he was “not pessimistic” about the resources sector’s future.

“I’m an optimist about the future of Australian resources and the workers and investors and businesses that make up that key industry. I’m very optimistic,” he said.

“The people and industries of WA do so much of the heavy lifting in our national economy. I understand and appreciate that, and I’m optimistic about the future of the industries which have made WA successful in the past and will continue to make WA and Australia successful in the future.”

Chamber of Minerals and Energy WA chief executive Rebecca Tomkinson said the hit to resources exports and company tax should be a wake-up call to the Government about the need for policies that better supported the sector, including environmental approvals, industrial relations and pledging no new royalties.

“These downgrades really show the pressure that industry is under in the global competition for investment. And it’s very significant that the policy settings are no longer just a handbrake, but they’re actually stopping growth in the resources sector,” she said.

The sector continued to be resilient “despite some very challenging headwinds” but “it can only do that for so long without the Government stepping alongside it and assisting to ensure it clears a pathway”.

Senator Gallagher said the Government continued its responsible approach to the Budget by finding further savings.

This includes saving $5.2 billion over the next four years in aged care after the new system that will lead to people contributing more was legislated with support from the Coalition.

Another $1.6 billion will be shifted around within the Defence budget to cover ongoing support for Ukraine and ADF training and retention initiatives.

But there is a $16.3 billion increase to government payments including the automatic indexation of aged pensions, and extra money spent on subsidies for childcare, prescriptions and support for school students with disabilities due to increased demand.

Another $8.8 billion will go to what the Government calls “unavoidable” spending, extending programs that would otherwise have run out of money, along with a $719 million blowout in infrastructure project expenses.

“We are doing the right thing by our veterans, pensioners, school kids and Australians who rely on essential health programs, but the Coalition’s plan to cut $315 billion in spending would see cuts across all of these areas,” Senator Gallagher said.