Treasurer Jim Chalmers has delivered a sobering mid-year budget update, revealing the Australian government's finances have deteriorated significantly since May. The Mid-Year Economic and Fiscal Outlook (MYEFO) projects a deficit of $12.6 billion for the 2024-25 financial year, a stark reversal from the $9.3 billion surplus forecast just seven months ago.
Key Measures and Spending Cuts
In response to the worsening fiscal position, the government has announced a series of spending cuts and savings measures totalling $27.5 billion over the next four years. A central pillar of this strategy is a significant reduction in infrastructure spending. The government will slash its ten-year infrastructure pipeline by $7.5 billion, deferring or cancelling 50 projects deemed less critical.
Other notable savings include winding back the National Water Grid Fund and making adjustments to the National Disability Insurance Scheme (NDIS). The MYEFO also confirms the government will proceed with its controversial changes to the stage-three tax cuts, a move that continues to draw political fire from the opposition.
Economic Forecasts and Global Pressures
The budget deterioration is largely attributed to a weaker global economic outlook and persistent domestic cost-of-living pressures. Treasury has revised its forecast for global economic growth in 2024 down to 2.75%, citing ongoing geopolitical tensions and higher interest rates. Domestically, while inflation is moderating, it remains a key challenge, with the consumer price index expected to return to the target band of 2-3% by the end of 2025.
Real GDP growth is forecast at 1.75% for 2024-25, reflecting the economic slowdown. The unemployment rate is predicted to rise slightly to 4.25% by mid-2025. Treasurer Chalmers emphasised that the government's strategy is focused on balancing fiscal responsibility with targeted cost-of-living relief, without adding to inflationary pressures.
Political Fallout and Future Implications
The MYEFO update has immediately intensified political debate. Opposition treasury spokesman Angus Taylor criticised the government, accusing it of "broken promises" and "economic mismanagement" that has led to higher deficits and debt. The government, however, frames the update as a responsible and necessary recalibration in the face of global economic headwinds.
Looking ahead, the MYEFO sets the stage for the next full federal budget, due in May 2025. The decisions outlined, particularly the infrastructure cuts and changes to tax policy, will have lasting implications for Australia's economic trajectory and will undoubtedly be a central battleground in the lead-up to the next election.
