Skyrocketing government interest charges

Debt repayment was flagged as one of the top five spending areas ahead of the Oct. 25 budget, alongside elder care, disability care, hospitals and defense.

On Friday, Treasurer Jim Chalmers will reveal how much spending in the regions is expected to rise when he speaks at an investment event hosted by the Queensland Government.

The cost of servicing the public debt is expected to increase by 14% each year, outpacing increases in other major spending areas.

Mr Chalmers said NDIS spending would increase by 12.1% each year, health by 6.1% and elderly care by 5%.

Defense spending will increase by 4.4% per year, on average, over the next four years.

The government has also lowered its forecast for global growth and warns that the Australian economy and budget will not be spared from the turmoil.

The Treasurer expects global growth to be 0.75% lower than forecast by 2022 and 1% lower in 2023 than previously forecast.

“The risk of major economic downturns is increasing, not receding,” Dr Chalmers said on Friday.

“And the impact that this is having on Australia’s economy and budget is getting tougher, not softer.”

The upbeat forecast came as debate rages over planned tax cuts in mid-2024, with the government refusing to rule out the possibility of changes to the legislation.

Education Minister Jason Clare said the government was bracing for tough budget decisions as the international economy deteriorated and budget pressures mounted.

“We have to make sure that we don’t do anything that would complicate the job of a reserve bank,” he told Seven’s Sunrise program.

“Where we invest more, like more investment in childcare, it’s designed to increase productivity rather than make things worse.”

Opposition Leader Peter Dutton said ministers’ failure to give a clear answer on the future of the cuts echoed broken promises from Labor governments.

“The Prime Minister looked the Australian public in the eye and gave them a solemn promise,” he told the Nine Network.

“That is, people with incomes of $45,000 to $200,000 would pay no more than 30 cents on the dollar. This is a big win for families struggling to afford their home prices. electricity, their gas bills, their fuel.”

Mr Dutton said the families had taken out house loans on the grounds that no major party would touch the legislative cuts and that any change would be “a complete betrayal of that trust”.

Dr Chalmers will also note that aggressive rate hikes by central banks around the world – particularly the US Federal Reserve – have put pressure on the value of the Australian dollar.

“The weak currency means that some of the things we buy overseas are getting more expensive, which complicates the already difficult job of the Reserve Bank of Australia,” he says.

On Tuesday, the RBA became the first major central bank to adopt a slower pace of tightening, with a 25bp hike belying expectations of a 50bp hike.

The updated forecast will be released in full in the October 25 budget.