Chalmers flags billions in NDIS savings as Middle East risks cloud budget
Treasurer Jim Chalmers has warned Australia’s economy is being buffeted by the war in the Middle East and flagged billions of dollars in cuts to the National Disability Insurance Scheme as the main savings in next month’s make-or-break budget.
Fresh from talks with international counterparts in Washington, Dr Chalmers said Australia remains vulnerable to “decisions taken in Washington and Tehran” and cautioned there is still a risk of severe economic consequences from the conflict.
He said he expects higher inflation, slower growth and higher unemployment in the months ahead, and noted the uncertainty is so acute that Treasury is considering including a “doomsday” scenario in the budget papers.
“We have learned not to get too carried away with each piece of news from the Middle East, whether it’s good or bad; we work through a whole range of contingencies in a considered and methodical way,” he said on Monday, describing recent developments as a “pretty wild ride” and “two steps forward and one step back”.
He also pushed back on predictions, including from prominent economist Chris Richardson, that the government could gain around $30 billion in windfall revenue. Economists warned the policy choices ahead are difficult. HSBC Australia chief economist Paul Bloxham said the country faces a “stagflationary” negative supply shock and is less well placed to handle it because inflation is already too high.
“We expect that outright stagflation is a rising risk. The aim for policymakers ought to be to keep it brief,” he wrote in a note to clients. Michael Brennan, chief executive of the non-partisan e61 Institute, said the fiscal position is “increasingly uncomfortable”, with “future options rapidly narrowing” as the government balances high inflation, a shaky growth outlook and public pressure for cost-of-living relief.
Opposition Leader Angus Taylor argued the solution must be lower government spending. He said stagflation had been made inevitable by “almost four years now of failed policies” and called for a budget that restores living standards, protects Australians’ way of life, and is “honest and transparent”.
The budget is beginning to take shape following last week’s $53 billion boost to defence announced by Defence Minister Richard Marles and what Dr Chalmers described as a major cut to the NDIS.
The Treasurer will be in Perth on Tuesday to meet business and state representatives and promote the $1000 instant tax deduction, promised at the election and now with legislation unveiled, which he said will benefit nearly 750,000 West Australians. “Western Australia makes a big contribution and that’s why it’s a big focus of our budget and our economic plan…
We’re backing them with tax cuts, tax incentives and the $1000 instant tax deduction,” he said. Dr Chalmers and Health Minister Mark Butler are due to outline the NDIS plan to state and territory counterparts on Tuesday afternoon, before Mr Butler unveils it publicly at the National Press Club.
The budget, shaped by these savings and a volatile global backdrop, will test the government’s effort to tame inflation without derailing a weakening economy.