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‘Slash and burn’: Jim’s budget warning

Treasurer Jim Chalmers will release his third budget on May 14 which is all but assured to reveal a second consecutive surplus. Picture: NCA NewsWire / Max Mason-Hubers

Treasurer Jim Chalmers has batted away concerns that a cash splash by state and territory governments is undermining the efforts of the federal government and the Reserve Bank to halt a resurgence in inflationary pressures.

Speaking to reporters in Canberra, Dr Chalmers welcomed initiatives by state and territory governments to make “life a little bit easier” for their populations.

“I think it’s an important thing that states are doing, providing cost of living relief for people in their own jurisdiction,” he said.

“These cost of living pressures are acute, they are still substantial, we need all shoulders to the wheel.”

Treasurer Jim Chalmers was unfazed by the spending measures unveiled by state and territory governments. Picture: NCA NewsWire / Max Mason-Hubers

Last week, the Queensland state government announced it would provide all households with a $1000 energy bill credit, as part of a wider cost of living package worth $2.5bn.


However, the support – which is not means tested – attracted significant criticism from some economists, who feared the initiative would spur demand by fuelling further spending from households that did not require additional assistance.

Speaking ahead of the Victorian budget, to be released on Tuesday, Victorian Premier Jacinta Allan flagged additional support, arguing that the pressures facing household budgets “can’t be ignored”.

“We are very aware, very attuned to the fact that the cost pressures that Victorian families and households are experiencing, we acknowledge that and acknowledge many are doing it tough right now,” she said.

Economists have warned state’s spending decisions risk posing a fresh inflationary headache for the RBA. Picture: NCA NewsWire / Martin Ollman

The Western Australian state budget, to be handed down on Thursday, is also expected to contain additional support for households in the form of an electricity credit, with the state’s Treasurer Rita Saffioti declaring she will deliver “the biggest-cost-of-living assistance” on record.

Earlier, Dr Chalmers eschewed calls for the federal government to exercise further spending restraint, arguing it was “not the time for scorched earth austerity” in a move that foreshadowed some expansionary measures in the budget.

“It would not be wise when people are doing it tough and when the economy is soft for us to slash and burn this budget,” Dr Chalmers said.

On Sunday, Dr Chalmers revealed the fresh budget documents would forecast larger budget deficits over the next four years than previously predicted, with tax receipt upgrades worth $25bn failing to offset an increase in spending.

Dr Chalmers foreshadowed some expansionary measures in the budget, eschewing calls for a clampdown in spending. Picture: NCA NewsWire / David Beach
Dr Chalmers foreshadowed some expansionary measures in the budget, eschewing calls for a clampdown in spending. Picture: NCA NewsWire / David Beach

The revelations means the budget will be expansionary, and is unlikely to be as effective at alleviating inflation as the 2023 budget as increased outlays across the NDIS, defence, social services and the landmark Future Made in Australia plan add to spending.

Appearing on Sky News on Monday, shadow treasurer Angus Taylor called on the government to exercise spending restraint “to put downward pressure on inflation and interest rates”.

“A big spending budget over the forwards is going to be inflationary … there’s no doubt about that,” Mr Taylor said, pointing to Labor’s recent commitment to plough $460 m in taxpayer funded equity and loans into US tech start-up PsiQuantum.