Australia’s debt levels are expected to surpass the $1trillion mark for the first time ever as welfare costs surge.
The Treasury Budget papers have warned that rising National Disability Insurance Scheme and aged pension costs were a particular challenge, with social security and welfare spending making up a third of government expenditure.
Most of Australia’s pandemic spending was done when interest rates were low but rising rates mean an increase in net interest payments on federal government debt.
Treasury noted higher recurring expenses on the NDIS and the aged pension would be a particular drain on the Budget during the next three years and beyond.
‘The structural Budget balance has undergone a deterioration since the onset of the pandemic, with a deficit projected to persist over the forward estimates and medium,’ it said.
‘This reflects the major investment in essential services that the government has undertaken in recent years in areas such as the NDIS and aged care.’
Australia’s debt levels are expected to surpass the $1trillion mark for the first time ever as welfare costs surge (pictured is Treasurer Jim Chalmers delivering his first Budget)
The NDIS now supports more than 500,000 Australians with more than 280,000 recently joining the care program.
The scheme, designed when Labor was last in government more than a decade ago, was expected to cost $166.6billion over four years – an increase of $8.8billion.
‘This will ensure funding for expected growth in participants’ plans,’ Treasury said.
With more people joining the NDIS, Labor has promised to spend $158.2million to employ 380 new permanent staff.
Treasurer Jim Chalmers told Parliament the government wanted to make the NDIS sustainable.
‘We choose dignity for Australians with disability,’ he said.
‘This Budget begins the task of repairing the NDIS and securing its future.’
The Treasury Budget papers have warned that rising National Disability Insurance Scheme (NDIS logo in Canberra, pictured) and aged pension costs were a particular challenge, with social security and welfare spending making up a third of government expenditure
Overall disability spending was expected to increase by 9.6 per cent between 2022-23 and 2025-26, as costs for every individual on the NDIS rose by 18.6 per cent.
‘These increases largely reflect an increasing number of people with disability entering the NDIS,’ Treasury said.
Treasury is also expecting more demand for the aged pension make up the bulk of new welfare spending during the next three years, with fewer Australians now needing unemployment benefits and pandemic leave.
Social security and welfare spending was expected to cost $221.7billion in 2022-23, making up roughly a third or 35 per cent of total government spending of $628.5billion.
Since the start of the pandemic in March 2020, the federal government has borrowed $360billion by issuing new Treasury bonds through the Australian Office of Financial Management.
Australia’s gross government debt is expected to reach $1.004billion in 2023-24, making up 40.8 per cent of gross domestic product or economic output.
This was expected to rise to $1.091trillion in 2024-25, comprising 42.5 per cent of GDP, and $1.159billion by 2025-26 comprising 43.1 per cent of the economy.
Rising interest rates also mean it’s more expensive for the government to service its debts.
Treasury noted higher recurring expenses on the NDIS and the aged pension would be a particular drain on the Budget during the next three years and beyond (pictured is a stock image of a woman in a wheelchair)
Australian government debt at a glance
2023-24: $1.004billion, making up 40.8 per cent of gross domestic product
2024-25: $1.091trillion comprising 42.5 per cent of GDP
2025-26: $1.159billion or 43.1 per cent of GDP
‘An increase in interest payments also contributes to the higher payments profile over the medium term, reflecting the increased levels of debt accumulated as a result of the pandemic,’ Treasury said.
Net interest payments on were expected to rise from 0.7 per cent of GDP in 2024-25 to 0.9 per cent of GDP in 2024-25, which Treasury said was manageable.
‘Despite the considerable fiscal cost of responding to Covid–19, the Australian government’s debt burden remains manageable and Australia continues to have lower debt as a share of its economy than many other advanced economies,’ he said.
‘Australia is one of only nine countries to maintain a AAA credit rating from all 3 major ratings agencies.’
Labor’s Budget aims to find $28.5billion in savings or revenue improvements over four years.
‘This Budget begins the difficult task of repairing the Budget and ensures fiscal policy does not add to inflationary pressures,’ Treasury said.
This includes cutting $3.6billion in outsourced external contractors to the public service, raising $952.8million over four years by cracking down on multinationals not paying tax, and finding another $3.7billion through catching tax avoidance among Australians.
In a bid to save money, Labor is abolishing the Australian Building and Construction Commission, a body a previous Coalition government created which trade unions have hated.
This is expected to save $130.9billion from 2022-23 to 2025-26.
From July 2023, Australians will no longer be allowed to self-assess ‘intangible’ depreciating assets on their annual tax return, saving the government $550million over four years from 2022-23.
In a bid to save money, Labor is abolishing the Australian Building and Construction Commission, a body a previous Coalition government created which trade unions have hated (pictured is a Sydney construction worker)