Labor has inherited a “dire” budget situation with a deficit that could blow out further due to soaring inflation, the treasurer, Jim Chalmers, has warned.
Chalmers accused the Coalition of not disclosing pressures on the budget, revealed in Treasury briefings since Labor’s election win on Saturday.
Before its defeat, the Coalition was projecting that budget deficits would total $223bn over the next four years, which Labor said it would increase by $7.4bn to implement its policies including more generous childcare subsidies.
Labor has said it would partially offset its promises through a $3bn cut to public service spending on contractors and labour hire, and $2bn from a crackdown on multinational tax avoidance.
On Wednesday Chalmers said Labor was “inheriting a very serious set of economic and budget challenges”.
“The defining challenges in our economy are skyrocketing inflation, rising interest rates, a fall in real wages and not having anywhere near enough to show for a budget which is absolutely heaving with a trillion dollars in Liberal party debt,” he told reporters in Canberra.
“We need to make sure we are upfront with the Australian people about the seriousness and the nature and the magnitude of the challenges that our new government is inheriting from our predecessors.
“No new government can flick a switch and make $1tn of debt disappear, flick a switch and completely fix overnight the substantial issues that we have with skyrocketing inflation and falling real wages.”
Chalmers said Labor had already identified “$11bn of budget improvements, which is a good start”, but would continue searching for savings in every budget.
Asked about the possibility of a better budget bottom line due to higher commodities prices, Chalmers warned against “assumptions about improvements in the budget”.
“Commodity prices have been stronger than assumed for a little while now but there’s no guarantee of that uplift in the budget and there are other factors working against us, including some pressures on the budget which were not disclosed or booked by the previous government.”
Chalmers said that “inflation is worse than Treasury thought not that long ago” – suggesting the budget could reveal a blowout in the cost of infrastructure and other projects – but declined to give specifics about what landmines Labor had uncovered in its briefings.
Chalmers confirmed Labor would push for changes in international tax rules to create a universal corporate minimum rate, as well as its own plans to increase the taxation of multinational companies.
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Chalmers said he had discussed a review of monetary policy with the Reserve Bank of Australia governor, Phil Lowe, but all existing arrangements would continue until it was complete.
“This is a really important opportunity to examine the framework, the operations, of the Reserve Bank to make sure that we are making monetary policy in this country in the best possible way and considering the interaction with fiscal policy as well,” he said.
Earlier on Wednesday, Chalmers hinted that Labor would continue to look for measures to ease the cost of living in its October budget but extending the six-month halving of petrol excise was unlikely.
“That comes off in September in the legislation that was approved before the election,” he told 2GB Radio.
“Obviously, when the time comes … if there are things that we can do to make things easier for people, we will. But we have to think about being responsible with the budget. That’s why it will be hard to extend the petrol price relief beyond September.”
Chalmers and the finance minister, Katy Gallagher, also confirmed that Labor would make a submission to the Fair Work Commission review on the minimum wage.
Gallagher told ABC TV it was “quite late into the process” but Labor would add a submission after ministers were sworn in next week.
Gallagher said Labor would argue that “low-income workers [wages should] keep up with the cost of living”, but a final decision on whether to nominate a 5.1% pay increase backed by Anthony Albanese in the campaign would be made later.