Treasurer Jim Chalmers will hand down the Albanese government's fourth budget next Tuesday night as millions are due to head to the polls in May at the latest.
After delivering two consecutive surpluses, Chalmers confirmed on Monday there would be a deficit in this year's budget. But he maintains the country's economy "has turned a corner".
He has also revealed initial estimates showing the economic costs of ex-Tropical Cyclone Alfred, which will be provisioned in the papers, and will soon detail global impacts, including from tariffs.
Due to the timing of this year's budget — and the impacts of Alfred ruling out a possible earlier election — several policies that will be in the budget have already been announced.
These are contingent on the government being re-elected, and some will be held back for the upcoming campaign.
Treasurer Jim Chalmers has confirmed there would be a deficit in this year's budget. Source: AAP / Lukas Coch
Ahead of Chalmers delivering a budget preview speech in Brisbane on Tuesday, here's what we know so far.
The bigger picture:
Speaking to reporters on Monday, Chalmers said after "back-to-back surpluses", there will be a deficit this year — but "much, much smaller than what we inherited".
The government's December Mid-Year Economic and Fiscal Outlook (MYEFO) projected a $26.9 billion deficit for this financial year. This was expected to reach $46.9 billion in 2025-26.
Chalmers said like previous budgets, "responsible economic management" will be a defining feature this financial year. He said this will be achieved by "managing the budget responsibly, and providing cost of living help, and investing in building Australia's future".
The impact of ex-Tropical Cyclone Alfred
In the Tuesday speech, Chalmers will outline Alfred's economic costs, which he reiterated to reporters on Monday.
Treasury's initial estimates show an immediate hit to Gross Domestic Product of up to $1.2 billion.
This could cut one quarter of a percentage point off quarterly growth, and increase pressure on inflation.
"We also anticipate there will be some impact on fruit and vegetable costs, depending on how much of the farmland has been impacted," Chalmers said on Monday.
"Depending on how much rebuilding will be necessary, we can anticipate some upward pressure on building costs as a consequence.
"There will also be a cost to the budget, and those costs will be substantial. We will provision an extra $1.2 billion in next week's budget in new funding for payments and to help rebuild local communities as well."
These additional costs are expected to take the government's disaster support to $13.5 billion — up from $11.6 billion included in its MYEFO.
'Global turbulence'
On Tuesday, Chalmers will also outline global impacts, noting: "This is a time of serious volatility in a global economy which is increasingly uncertain and unpredictable."
"A new United States administration disrupting trade, a slowdown in China, a war in eastern Europe and a fragile ceasefire in the Middle East, political division and dissatisfaction around the world," he is expected to say.
"We’ve seen extreme market volatility in the US and elsewhere, as a consequence."
"The risk of recession in the world’s largest economy is rising too.
"All this has consequences for us".
Chalmers will point to global growth over the next three years expected at its weakest since the 1990s — "even in the most benign scenario".
"Treasury forecasts in the budget will have Chinese and American growth slowing to around 4.5 and 2 per cent next year, respectively," he is expected to say.
"The forecasts for the US are the same as the mid-year update but the downside risks are weighing more heavily now."
When it comes to trade, he is expected to say the nation "has a lot at stake", and describe the decision not to exempt Australia from American tariffs on steel and aluminium as "disappointing, unnecessary, senseless and wrong".
"We are not uniquely disadvantaged by these tariffs, but we deserve better as a long-term partner and ally."
According to Treasury estimates, the direct hit to GDP from steel and aluminium tariffs would be less than 0.02 per cent by 2030. When indirect effects are added, this could rise to 0.1 per cent.
Over a range of scenarios, Treasury found the indirect impacts of a trade war could be up to four times larger than the direct effects of tariffs on the economy.
"Our response to this will not be a race to the bottom on tariffs. We’ll go for more resilience, not more retaliation," Chalmers is expected to say.
"Because more and higher tariffs would harm, not help, our workers, businesses, industries and economy."
Cost of living
When asked about cost of living measures in this year's budget, Chalmers said the government considers when it can afford to provide more responsible help.
"But our focus right now is on rolling out the very substantial, meaningful but very responsible cost of living help that we've already budgeted for," he said on Monday.
One of the centrepieces of last year's budget was an energy bill rebate for every Australian household and some small businesses. The budget included a range of other cost of living measures, including tax cuts, rent assistance, and some relief for students and people with student debt.
Last November, the government — if re-elected — promised to cut a further 20 per cent from all student loan debts by 1 June 2025, which it said would wipe around $16 billion in student debt for around three million Australians.
Meanwhile, the Coalition said income taxes have grown under the Albanese government.
Opposition treasury spokesperson Angus Taylor said income tax has grown under the Albanese government. Source: AAP / Mick Tsikas
Opposition treasury spokesperson Angus Taylor said: "Australians are paying more because of Labor's reckless policies and irresponsible spending."
Chalmers disputed the timing of the figures used as "egregious" dishonesty, noting: "We provided a big tax cut in the middle of last year."
"This is an egregious bit of dishonesty for him to put out numbers from before more than $20 billion a year in tax cuts that are rolling out right now," he said.
Early childhood education
Last December, Prime Minister Anthony Albanese promised a guaranteed three days of subsidised childcare per week, with $1 billion going towards expanding quality and access, if Labor is re-elected.
Families earning less than $530,000 would qualify for the scheme, which would replace the current activity test model for accessing childcare subsidies.
Medicare boost
Last month, the government pledged a major $8.5 billion funding boost for Medicare, which it said would expand the bulk billing incentive currently only afforded to a select group of people to all 26 million Australians, and incentivise payments for clinics to bulk bill.
The government has also vowed to open an extra 50 urgent care clinics by the end of June 2026, in a $644 million pre-election promise.
Opposition leader Peter Dutton has said the Coalition would match the plan.
Infrastructure
Albanese has also announced a $2.4 billion joint state-federal package to support Whyalla Steelworks in South Australia, after it was placed into administration, along with $7.2 billion to upgrade and fix the Bruce Highway in Queensland.
The Opposition will present its reply to the budget next Thursday.
It has indicated that costings around its own commitments will be released for voters closer to the federal election.
