Government Announces Over $14 Billion of Savings in the Budget

Australia's Treasurer Jim Chalmers (Front R) and Finance Minister Katy Gallagher (Front L) arrive for the budget lock-up at Parliament House in Canberra, Australia on May 14, 2024. Tracey Nearmy/Getty Images

The Albanese government has unveiled $14.6 billion (US$9.3 billion) in savings and reprioritisations as part of its Mid-Year Economic and Fiscal Outlook (MYEFO), highlighting structural reforms and spending restraint aimed at shoring up the nation’s budget sustainability.

Treasurer Jim Chalmers and Finance Minister Katy Gallagher detailed the measures on Dec. 17, citing ongoing pressures and unavoidable spending needs.

The savings, achieved through adjustments across aged care, defence, education, and Indigenous programs, bring the government’s total reprioritisations to $92 billion over two years.

The full MYEFO report will be released on Dec. 18 detailing further revisions to economic forecasts, government revenue, and spending initiatives.

Key Savings and Reprioritisations

Gallagher outlined areas targeted in MYEFO, emphasising the government’s commitment to funding high-priority programs efficiently.

Savings include better targeting of residential aged care funding, renegotiation of COVID-19 vaccine supply agreements, and adjustments to defence and education programs.

Indigenous advancement programs have also been streamlined to fund the Remote Employment Service announced last week.

The update highlights spending restraint across departments such as Home Affairs and employment, as well as specific investments under the Townsville City Deal, including support for reconstruction of the Great Barrier Reef Aquarium.

“Every single budget or update since we came to government, we have found savings and reprioritised spending to ensure every dollar is going to the highest-quality programs,” Gallagher said.

She underscored the government’s changes to aged care and the NDIS as “the biggest structural savings to the budget seen in the past decade.”

Minister for NDIS Bill Shorten is expected to announce an additional $1 billion for the NDIS, including $280 million for the National Disability Insurance Agency (NDIA) to implement a new in-house system for assessing participants’ funding needs.

The agency will conduct and cover the cost of assessments, removing the financial burden on families. Shorten said the reform, a recommendation from last year’s NDIS review, would prevent the scheme from becoming “a two-class scheme” where access to proper assessments depends on wealth and location.

Unavoidable Spending

Despite the savings Gallagher acknowledged $8.8 billion in “unavoidable spending” inherited from the previous coalition government. This includes funding cliffs in ongoing programs that lacked sustained funding.

The new funding includes significant investments in health, aged care, and infrastructure. Additional resources have been allocated to the Pharmaceutical Benefits Scheme (PBS) for listing new drugs, while energy security will be strengthened through upgrades to Australian Energy Market Operator’s digital systems.

Extra funding will support veterans’ services, the NDIA, and disaster recovery efforts, including $1.8 billion for regions like Far North Queensland.

Chalmers noted these measures address long-standing pressures while accommodating rising demand in critical areas, such as aged care services and pension indexation.

Taylor Labels MYEFO a ‘Shocker’

Meanwhile Shadow Treasurer Angus Taylor said the government’s mid-year economic update was going to be an “absolute shocker.”

“They have absolutely lost control on this because they think that spin is the way to get through a cost-of-living crisis,” he told Sky News on Dec. 17.

“The government [has] driven the economy off a cliff: seven consecutive quarters of GDP per person going backwards, seven consecutive quarters of household recession.”

He noted the Coalition has opposed more than $110 billion of spending in parliament but did not directly address where the party would cut expenses if elected in 2025.

“It’s the aggregate level of spending that matters. Well, I’m not going to go through each of the individual issues that are out today,” he said.

Budget Sustainability and Surpluses

Chalmers responded and said Coalition plans could jeopardise key programs.

“When they talk about wasteful spending, they mean cuts to Medicare, medicines, and pensions. These are priorities for Australians, not targets for cuts,” he said.

He reaffirmed the government’s commitment to responsible economic management, citing two consecutive budget surpluses as proof of its fiscal discipline.

The first surplus turned a $78 billion deficit into a $22 billion surplus, followed by a second $16 billion surplus, on the back of strong commodity prices post-COVID.

“Savings, spending restraint, and tax reform have been hallmarks of our approach,” Chalmers said.

He argued reducing debt has saved tens of billions in interest repayments, creating room for essential priorities like Medicare, pensions, energy security, and disaster recovery.

Chalmers criticised the Coalition for leaving unfunded programs requiring urgent support and failing to deliver meaningful savings in its last budget.

Challenges and Criticism of Coalition Plans

While presenting MYEFO, Chalmers and Gallagher criticised the Coalition’s proposals, particularly Peter Dutton’s nuclear energy plan.

Chalmers labelled it “economic insanity,” claiming it would result in higher energy bills and delayed benefits.

“Australians will pay for this plan immediately, even though nuclear power plants are decades away,” he said.