The Australian Government will announce fresh spending cuts before Christmas as it comes under pressure to curb inflation and ease the cost-of-living strain facing households.
Housing Minister Clare O’Neil said a new savings package was being prepared for the Government’s December economic update, as the Reserve Bank raises interest rates and warns that the coming economic conditions could feel like a recession.
The central bank has lifted rates to an 18-year high of 4.85 per cent. Governor Michele Bullock said Australians could feel poorer as incomes struggle to keep pace and household spending remains constrained.
“It is going to make people feel like it’s a recession because they feel poorer, their spending can’t grow very quickly because their incomes aren’t growing very quickly,” Ms Bullock said.
Government spending cuts to be announced
Ms O’Neil said families were frustrated and exhausted after years of financial pressure, and acknowledged that the latest economic warnings had added to their concerns.
She cited international and domestic factors behind the renewed inflationary pressure, including what she described as a “massive war in Iran” and an artificial intelligence boom drawing resources into data centres and other projects.
“Then we’ve got those domestic pressures as well which means, when our country does start to grow a bit, what we see is, instead of that growth being shared, inflation is starting to go up again,” she said.
Ms O’Neil said the Government’s priorities were to reduce public spending, provide cost-of-living support without fuelling inflation and improve productivity.
“At the moment we’re working on a budget which will help us do that coming into the back end of this year,” she said.
She confirmed that further savings would be included in the next mini-budget, expected in December.
“Every six months, we have a mini budget that goes in around December. So, we will make some announcements then about a savings package that the Treasurer has already talked about and the government is working through this at the moment,” Ms O’Neil said.
However, she said any cuts would have to be designed carefully to avoid undermining essential services, including Medicare and aged care.
“We’ve got to be really thoughtful about how we do this. It’s not a simple exercise,” she said.
Coalition attacks Labor’s economic record
Bridget McKenzie, the Nationals’ Senate leader, accused the Labor Government of failing to take responsibility for Australia’s economic difficulties and said its focus on international events was distracting from domestic problems.
“At the end of the day, empathetic statements don’t help fix this problem that the Labor Party created. Making the tough decisions in a budget does,” Ms McKenzie said.
“The Labor Party’s economic incompetence has been revealed, and they need to not spend more than they save. That is what will actually fix this problem.”
Ms O’Neil defended the Government’s record, saying it had delivered two budget surpluses and cut $180 billion in excess spending.
