Government Won't Promise Net Savings in Budget Update

Finance Minister Katy Gallagher stated that growing pressures on the federal budget mean the government cannot promise net savings in its upcoming December update. This comes as Australians prepare for another potential interest rate rise amid persistent high inflation.

Treasurer Jim Chalmers also declined to commit to net savings in the mid-year budget update, following a worse-than-expected inflation rate of 4.3% for the year to September. This has increased anticipation of another rate hike during the Reserve Bank's upcoming meeting.

Gallagher emphasized that she would not pre-commit to overall savings, stating that the Expenditure Review Committee process was still ongoing. She acknowledged the effort being made by herself and Chalmers to find savings but stressed that decisions had not yet been finalized.

The minister denied that the pressure to find savings was causing internal cabinet tension, calling for 'robust' debate among ministers. She noted that the government's past budgets and mid-year updates had consistently delivered budget improvements and found more savings than new spending.

The Reserve Bank's chief economist previously stated that government spending remains a factor in ongoing inflation, despite the government attributing inflation primarily to the war in Iran. Treasurer Chalmers warned that rising borrowing costs would add billions to the budget due to long-term expectations of higher global interest rates.

Other budget pressures include health and aged care, with Gallagher stating that spending in these areas was necessary to stabilize a 'freefall' Medicare system and clear veteran processing backlogs. She highlighted that these challenges were different from those faced in previous decades, such as the Howard era.