Labor has declared inflation the “primary focus” of this month’s federal budget, as the government walks the tightrope of lowering cost of living pressures while putting downward pressure on the bottom line.
Amid growing calls for spending cuts to take the heat off interest rates, and ahead of this week’s meeting of the Reserve Bank board, Finance Minister Katy Gallagher on Sunday would not be drawn on what Labor’s budget tactics would be.
She said savings were “increasingly difficult to find” but what those might be, what additional cost-of-living measures might be included and whether it was, more broadly, a “contractionary budget”, would all be revealed on May 14.
She did stress, however, that there was “a lot of pressure on the budget”, and said decisions had been underpinned by wanting to take pressure off inflation.
“Inflation is a focus of the budget,” she told ABC’s Insiders.
“It’s been a primary focus of our budget. And you’ll see that the investments we’re making are putting downward pressure on inflation.
“But at the same time, we need to get serious about the investments that we’re going to make to grow the economy as well.”
The government announced on Sunday it had found $1bn in savings from reducing spending on consultants, contractors, and labour hire in the 2024-25 Budget.
She said the government was looking at “the quality and composition of spending”.
“You will see some savings, you’ll see some reprioritisation with existing expenditure, you’ll see all of that,” she said.
“But the pressure on the budget is real and intensifying.
“It will be a budget that needs to invest in the areas that we need to, and in those areas that are unavoidable.”
Treasurer Jim Chalmers is expected to deliver his second budget surplus, with predictions of about $13bn.
This week, there were calls for the government to funnel that windfall into greater investment in housing and combating domestic violence, but the government has maintained the more surpluses they can bank, the better it will be for the country in the long run.
Labor is making its final decisions around the same time as the Reserve Bank meets on Monday and Tuesday.
Economists largely expect the RBA to keep the cash rate steady at 4.35 per cent, but the number of those who believe a cut is coming this year is rapidly dwindling.
Inflation rose 3.6 per cent in the year to the March quarter, prompting some economists to predict even more rate hikes this year.
Deputy Opposition Leader Sussan Ley said inflation was “homegrown” under Labor.
“We know there’s a task to be done … This inflation is coming from Canberra,” she told Sky news.
“While the rest of the world is bringing inflation under control, we’re not.”
She said the government needed to seriously look at cutting programs to bring the budget back under control.