Federal Budget 2022: Inflation shapes ‘solid and sensible’ Budget as Government looks out for families

Infrastructure projects will be pushed back, grants programs cut and public service spending slashed in Tuesday’s budget after the government found $21 billion to cut or redirect. But an extra $33 billion will be poured into pensions and welfare payments to keep up with high inflation. Prime Minister Anthony Albanese and Treasurer Jim Chalmers have promised to hand down a “family-friendly Budget” that helps people without putting further pressure on inflation. The Budget papers will contain new Treasury forecasts downgrading Australia’s anticipated growth over the next few years, driven mainly by weaker household spending as rising interest rates and the growing cost of living bite. Dr Chalmers has conceded that workers’ real wages will go backwards for another two years, with the east coast floods meaning high inflation will stick around longer than previously forecast. Inflation is expected to peak at 7.75 per cent by the end of this year, but is forecast to stay higher than 3 per cent through to the middle of 2024. Meanwhile, wages grew by 2.6 per cent in the year to June. “The Budget will show that wages will move substantially but they won’t cross over, in our estimation or the Treasury’s estimation, until we get that inflation under control,” Dr Chalmers told ABC TV. Deputy opposition leader Sussan Ley said the Government had set its own test for the Budget by promising no one would be left behind or held back. “From where I am sitting. with each and every day that passes, they let more and more Australians fall through the cracks,” she said. “If they are serious about helping those people, this Budget will outline the cost of living plan they promised everyone at the election.” The Budget will show the domestic economy is expected to grow by 3.25 per cent in 2022-23, which is 0.25 percentage points lower than forecast ahead of the election. The GDP growth forecast for the following year is now a full percentage point lower at 1.5 per cent. Dr Chalmers said while the economy was growing, so too were the challenges. “These headwinds will inevitably impact our growth outlook, and Australians are already feeling the pinch from higher prices and rising interest rates,” he said. But he said the Government could afford big-ticket items such as cheaper childcare and expanding paid parental leave because it was taking responsible decisions elsewhere. The Government’s “waste and rorts” audit led by Finance Minister Katy Gallagher has reaped $21 billion in savings and redirected spending. All ministers were told to find savings across their portfolios. This includes $6.5 billion from “reprofiling” infrastructure projects which have faced cost blowouts due to labour shortages and higher prices of building materials, and $3.6 billion saved by cutting down on public service contractors, advertising and travel and legal expenses. The Government will also cut more than $2 billion from grants programs. This includes cancelling some projects, such as five Victorian urban congestion projects that were significantly underfunded or not backed by business cases. One of these projects had been allocated $110 million by the previous government when it needed $640 million. Another road upgrade had been funded $50 million and would have needed a further $223 million to realise. “The former government used taxpayers’ money to cynically buy votes before elections by politicising grants funds and used the Budget to land political deals with the Nationals in the Coalition party room — that approach to spending ends in Labor’s first Budget,” Senator Gallagher said. Mr Albanese said the Government was being cautious in its spending and wouldn’t follow the Coalition’s example from March of offering short-term measures “that of course ran out straight after the election”. “We would like to do much more but we will be responsible. We will make sure that we have our eye on the economic constraints which are there because we do need to address the cost of living and there will be a range of measures but they are all aimed at cost of living measures that don’t put more pressure on inflation,” he said. Dr Chalmers has also revealed an extra $33 billion will be spent on pensions and welfare payments, reflecting the need for them to keep up with increasing costs of living. New spending will also include funding an extra 20,000 university places — more than 3000 of them in WA — in teaching, nursing, engineering and IT courses to help address skills shortages. WA’s five universities will share $91.9 million to take on more students. Curtin and Edith Cowan are among the top five universities nationally for the new places, receiving funding to take on an extra 1023 and 840 students respectively. The new places will be allocated to students from poorer backgrounds, Indigenous Australians and those from regional areas. “This means more teachers, nurses and engineers and it means more Australians from poor families and rural and remote Australia doing these jobs. That’s life-changing,” Education Minister Jason Clare said. It’s part of a billion-dollar investment in TAFE and higher education as the Government seeks to address the skills crisis hampering business. Dr Chalmers said inflation was the primary influence on the budget. “The worst thing that we could do as an Australian Government would be to spray money around in an indiscriminate way that would actually make our inflation problem worse,” he told Channel 7. “(The Budget) will be solid, it’ll be sensible, it’ll be suited to the times, and it will do more than just batten down the hatches against all of this uncertainty. It will back in families, it will build a better future and I hope it brings Australians together around this recognition that we can have a better future. But first, we’ve got to navigate some pretty tricky territory.”