SYDNEY (Reuters) – Australia’s mid-year budget update will include about A$10 billion ($6.56 billion) in savings, official data showed on Tuesday, as the government looks to cut spending in a bid to contain high inflation.
The Mid-Year Economic and Fiscal Outlook, which will be released on Wednesday, would show the federal Labor government had reined in spending, bringing the total amount of savings delivered since the 2022 election to A$49.6 billion.
“We know households are doing it tough at the moment and our responsible approach will ensure we are not putting upwards pressure on inflation,” Finance Minister Katy Gallagher said in a statement.
Australian households are under broad financial pressure from high inflation and rising interest rates, but a top central banker last week said severe stress is still rare and the vast majority of borrowers can service their loans.
The Reserve Bank of Australia has been raising rates since the middle of last year to curb inflation which spiked as high as 7.8% last December, before slowing to 5.4% in the third quarter.
“We are continuing to show restraint and to find savings and reprioritisations to account for new spending, some of which is unavoidable,” Gallagher said.
The “unavoidable spending pressures” would come to about A$5.2 billion, which Gallagher blamed on the former coalition government. A total of A$1.5 billion will be used to end the COVID-era pandemic visa scheme, while A$392 million will be used for COVID-19 responses, including continued support for aged care.
Gallagher did not mention if Australia would record a second successive surplus this year. Australia recorded a budget surplus of A$22.1 billion ($14.5 billion) for the year to June 2023, five times earlier estimates, as strong jobs growth and bumper mining profits helped it post its first surplus in 15 years.
($1 = 1.5237 Australian dollars)
(Reporting by Renju Jose in Sydney; Editing by Lincoln Feast.)