LIFT SPEND ON DEFENCE - US; TAS DEBT PEAK

US Defence head cites five per cent spending target

Deputy Prime Minister Richard Marles says Australia will “continue to have the conversation” with the United States on calls for US allies to lift defence spending. Mr Marles met with US Defense Secretary Pete Hegseth at the Shangri-La Dialogue in Singapore, where Secretary Hegseth told his counterparts that Asian allies should look to European defence commitments as an example. NATO members, he said, were pledging to spending five per cent of their gross domestic product on defence. “It doesn’t make sense for countries in Europe to do that while key allies in Asia spend less on defence in the face of an even more formidable threat,” Mr Hegseth told the forum. The Deputy PM and Defence Minister said the Americans had been “very clear” about wanting to see more from their friends and allies around the world. He said Australia had in recent years engaged in its single biggest peacetime increase in defence spending, including via the AUKUS defence partnership.

Net debt poised to double in Tasmania

Tasmania faces four more years of budget deficits and a doubling in net debt, according to the 2025-26 State Budget delivered last week by the Rockliff government. In his first budget, Treasurer Guy Barnett announced that Tasmania would post a $1 billion budget deficit next year; the deficit for the current year is expected to finish around $1.28 billion – up by almost $500 million on the figure first projected in the 2024-25 budget. Net debt is projected to rise from an expected $5.2 billion this year to $10.7 billion in 2028-29. In his budget speech, Mr Barnett ruled out divestment of government assets in shipping and hydro-electricity generation. He said that Tasmania was experiencing its lowest ever level of unemployment, with economic output (gross state product) rising by 26 per cent in the last 10 years.

Core inflation edges up in April

Headline inflation remained steady in April, with the annual Consumer Price Index indicator rising 2.4 per cent in the previous 12 months. While the annual CPI indicator increase remained at the level for March, the Australian Bureau of Statistics reported a slight increase in annual core inflation, from 2.7 per cent in March to 2.8 per cent in April. Higher costs for gas, rent and education contributed to the upwards movement in the so-called trimmed mean, which excludes volatile items and is the Reserve Bank of Australia’s preferred measure to guide monetary policy.

Private capital investment eases over year

Private capital investment has edged downwards in the latest quarter, falling by 0.5 per cent over the 12 months to March, according to latest figures. ABS figures show that investment in equipment, plant and machinery fell by 1.8 per cent, seasonally adjusted, over the 12-month period. Private investment in building and structures, however, rose by 0.6 per cent over the year, with total private capital investment easing to $44 billion in the March quarter. Meanwhile, Federal Treasurer Jim Chalmers has announced that foreign investors in Australia would benefit from a new online portal to submit foreign investment proposals, pay fees and view outcomes. Dr Chalmers said the new portal would enable quicker identification and management of low-risk investments, and strengthen the management of high-risk investments.

One Nation doubles Senate membership

Four weeks after the May 3 election, the Australian Electoral Commission is poised to confirm the makeup of the Senate from July 1. Labor has increased its Senate numbers by four seats to 28, with the Coalition on 27. The Greens will hold 11 seats, ahead of Pauline Hanson’s One Nation Party, which snatched an additional two seats in New South Wales and Western Australia to bring its tally to four seats. There will be six other crossbenchers, but their support for Coalition-opposed legislation will not be needed, if Greens Senators support Labor in the 76-seat Upper House. (Late on Monday June 2, WA Greens Senator Dorinda Cox announced that she would defect to Labor; this would give Labor 29 seats in the new Senate, and The Greens, 10 seats.)

Winter crop production falls sharply

Australia’s winter broadacre crop production dropped sharply in 2023-24, with a 29 per cent fall in crop value, according to latest figures. The ABS reported that the 2023-24 winter broadacre harvest yielded 50 million tonnes, down 18.6 million tonnes on 2022-23 figures, with a reduced combined local value of $18.7 billion. Wheat, barley and canola crop production fell in all states except Victoria, with wheat sales falling 32 per cent to 28 million tonnes. Western Australia remained the largest state for wheat, canola and barley production. Ongoing drought conditions in south-east Australia are likely to see further falls in winter crop production in 2025.