What to expect in the Budget tonight
- Electricity rebates extended for six months
The man behind Anthony Albanese's campaign for a second term is spending billions on cost-of-living help in a desperate bid to get Labor re-elected during turbulent economic times
Treasurer Jim Chalmers' fourth Budget is being handed down tonight, with an election due to be held by May 17 and Labor the underdog in opinion polls.
Australians are getting electricity rebates for another six months as part of Labor's cash splash which also includes reducing prescription costs, cutting student debt, subsidising steel and aluminium manufacturers, and rebuilding the treasurer's cyclone-hit home state of Queensland.
It comes against a backdrop of predicted deficits in the years ahead as falling iron ore prices erode federal government revenue and make it harder for Australia to respond to catastrophic events.
Donald Trump's tariffs have also created more uncertainty, as US-led trade wars spark a global economic slowdown and reduce Chinese demand for Australian resource exports.
Westpac estimates Labor announcements since the end of last year have already cost the Budget $10.7billion over the next four years.
Here's what we know will be in the Budget tonight so far...
Electricity rebates extended
Another $150 in electricity bill relief is being rolled out, extending the cost-of-living measure until December 31 at a cost of $1.8billion.
The $300 rebates from last year's Budget were due to expire on June 30, and electricity companies are getting their last quarterly subsidies of $75 on April 1 to pass on to customers.
Treasurer Jim Chalmers ' fourth Budget is being handed down tonight, with an election due to be held by May 17 (he is pictured left with Finance Minister Katy Gallagher)
Dr Chalmers argued the extension of the electricity rebates until the end of 2025 was about tackling cost-of-living challenges.
'This is hip pocket help for households, and that's because we know that the cost-of-living is front of mind for most Australians and it's front and centre in the Budget,' he told the Seven Network.
'This is another two quarters of energy bill relief, which recognises that even with all the progress we've made together on inflation, people are still under pressure and the Budget is designed to respond to that.'
Labor had also gone to the last election promising to reduce average power bills by $275, and this extension could also be designed to neutralise a vexing political issue.
But Dr Chalmers argued Labor had not broken its 2022 election promise.
'You asked me about $275. We took $300 off last year,' he told Sky News.
The extension of electricity subsidies for households and businesses is also about containing headline inflation, given they artificially reduced the consumer price index last year.
The Reserve Bank last month predicted the CPI would climb to 3.7 per cent by the end of 2025, without the rebates being extended beyond July.
Another $150 in electricity bill relief is being rolled out, extending the cost-of-living measure until December 31 at a cost of $1.8billion
That ugly scenario would see inflation soaring back above the RBA's 2 to 3 per cent target, up from the present level of 2.4 per cent.
Treasury estimates the six-month extension of the electricity rebates will shave 0.5 percentage points off headline inflation by the end of 2025.
But Westpac head of business and industry economics Sian Fenner warned borrowers not to expect any extra interest rate cuts from the Reserve Bank, as a result of these extended power rebates.
'We expect the RBA will again "look through" these effects when assessing policy,' she said.
The Australian Energy Regulator had recommended capping price increases at 2.5 per to 8.9 per cent, meaning power price rises would continue to dog the government unless it extended the rebates.
Cheaper medicines
Australians will see their prescription medicine costs capped at $25, down from $31.60 now, at a cost of $680million.
Scripts for concession card holders, including pensioners, will be free once they have spent more than $277 a year on medicines, down from $7.70 now.
The $7.70 co-payment cap had already been frozen until June 2029.
Australians will see their prescription medicine costs capped at $25, down from $31.60 now, at a cost of $680million
The government is beefing up the Pharmaceutical Benefits Scheme, even though American pharmaceutical giants have complained about the subsidy eroding their potential earnings in Australia.
In an election year, both sides of politics are committed to the PBS, even with the Trump Administration set to slap new tariffs on Australian pharmaceutical exports from April 1.
Labor has already announced an $8.5billion boost to Medicare over four years.
Labor is also setting aside $644million to open another 50 Medicare Urgent Care Clinics, with more clinics in every state and territory.
Cyclone Alfred
Cyclone Alfred's devastation of south-east Queensland and northern NSW is set to cost the Budget $1.2billion.
Dr Chalmers, a Queenslander from flood-hit Logan, announced the figure a week before the Budget.
This was after the downgraded tropical low caused extensive damage to Brisbane and the Gold Coast, and flooded areas of NSW down to Grafton.
'First of all, we're still assessing the damage, but I can't wait for another two or three or four weeks or a couple of months before I put it in the Budget,' Dr Chalmers told the Queensland Media Club.
Cyclone Alfred's devastation of south-east Queensland and northern NSW is set to cost the Budget $1.2billion (pictured is erosion at Surfers Paradise on the Gold Coast)
Labor, desperate to ward off the Greens in inner-city electorates, last year announced a 20 per cent cut to student debt (pictured are University of New South Wales students)
'I've got to put a number in the Budget a week from today. So we make a sensible provision for the recovery and rebuilding communities.'
Student debt
Labor, desperate to ward off the Greens in inner-city electorates, last year announced a 20 per cent cut to student debt.
This one-off measure will benefit 3million Australians as $16billion is shaved off Higher Education Loan Program and Higher Education Contribution Scheme debts.
This is on top of a $3billion reduction in student debt via new indexation arrangements.
Debt levels will now never be higher than the change in wages, with indexation linked to either the wage price index or the consumer price index, whichever is lower.
Steel and aluminium subsidies
The Trump Administration's 25 per cent tariffs on Australian steel and aluminium manufacturers came into effect on March 12.
The Albanese government responded in kind a week later with a $750million plan to subsidise steel and aluminium makers, as part of Labor's Future Made In Australia policy.
The environmental subsidies were from the $1.7billion Future Made In Australia Innovation Fund, announced last year in the 2024-25 Budget.
The Albanese government responded in kind to the Trump Administration tariffs with a $750million plan to subsidise steel and aluminium makers, as part of Labor's Future Made In Australia policy (pictured are BlueScope workers in Wollongong)
This is on top of a $2.4billion rescue package for South Australia's trouble Whyalla steelworks, now in administration, with the state government.
Financial state of play
Dr Chalmers has delivered two consecutive Budget surpluses, the first for a federal government since 2007 before the Global Financial Crisis.
But deficits are expected from 2025-26 onwards, with iron ore prices tipped to fall to just $US60 a tonne by mid-2025, down from levels above $US100 a tonne in 2024.
Weaker iron ore prices reduce federal government company tax revenue, and West Australian government royalties.
'We also believe the scope for significant upward surprises to future revenues is more limited than in recent years,' Ms Fenner said.
Gross government debt is also set to climb above $1trillion for the first time during the next financial year, making up 36 per cent of gross domestic product.
This could make it harder for future Australian governments to respond to cataclysmic events.
'As debt escalates, there will be less fiscal space to implement counter-cyclical measures to help absorb future shocks, as they were able to for the GFC and the pandemic,' Ms Fenner said.
'This comes at a time when growing geopolitical uncertainty, increasing trade tensions, more frequent weather events and ongoing technological change may mean shocks are more frequent.'
