BUDGET FILLIP; POWER SHOCK FOR PRICES

Budget deficit whittled down to $10 billion

The Albanese Labor Government has delivered its first budget deficit since it came to office in 2022, but the shortfall in the final budget outcome is considerably lower than predicted almost six months ago. Treasurer Jim Chalmers and Finance Minister Katy Gallagher said Australia’s final budget outcome for 2024-25 would be a deficit of just under $10 billion, driven by lower payments, low unemployment and higher earnings. Dr Chalmers said the final budget outcome was substantially lower than the $27.9 billion deficit forecast in Treasury’s pre-election fiscal outlook (PEFO) issued in April. The Treasurer said that Federal payments for the year were almost $5 billion lower than the PEFO forecast, while receipts were $13 billion higher on the earlier forecast. Budget papers show that the Federal Government delivered a budget surplus of $15.8 billion in 2023-24, with a budget deficit of $42.1 billion forecast for 2025-26.

Electricity price spike drives higher headline inflation

A sharp rise in electricity prices has helped to elevate the annual inflation rate, with the Consumer Price Index indicator rising to three per cent in August. Figures from the Australian Bureau of Statistics show that annual electricity prices rose almost 25 per cent in August, after a 13.6 per cent increase in July. The spike in power prices was attributed to a conclusion of government-funded rebates. In August, the annual trimmed mean level of inflation – which excluded the sharp rise in electricity prices – fell from 2.7 per cent to 2.6 per cent.

Farrell defends government handouts in free trade regime

Trade Minister Don Farrell has brushed off claims that the Federal Government’s assistance to the aluminium and steel sectors was at odds with international rules on protectionism. In a televised interview, Senator Farrell said Australia’s ability to produce steel was a matter of national security and national interest, and was not a breach of the nation’s international obligations. The Minister defended government support for aluminium smelters and steel plants in Queensland, New South Wales, South Australia and Tasmania. He said Australia would continue to push for the United States to abolish its 10 per cent tariff on Australian-made goods, in line with the free trade agreement struck between the two nations 20 years ago, which provided for zero tariffs.

GST revenue distribution faces Federal review

Federal Treasurer Jim Chalmers has directed a review of the allocation of revenue from the nation’s goods and services tax, which is collected by the Commonwealth but distributed to states and territories. Dr Chalmers has ordered the Productivity Commission (PC) to assess current GST revenue arrangements, including whether there was a reasonable level of horizontal fiscal equalisation between states and territories. The PC will also investigate whether current arrangements were supporting states and territories to pursue reforms. In 2018, Federal legislation changed the way GST revenue was distributed among the states, to address concerns about the volatility of the revenue source, with a provision for Federal ‘top-up’ payments. In 2024, the Commonwealth Grants Commission estimated that the GST pool for distribution would be around $89 billion in 2024-25. GST distributions for New South Wales (by -$310 million) and Queensland (-$469 million) were projected to fall in 2024-25, but rise elsewhere, including in Victoria (up by $3.6 billion) and in Western Australia ($838 million higher).

University starts up, dropout rates down, says Clare

Federal Education Minister Jason Clare says Australians are starting university at record levels, outside the commencements during the two years of the Covid pandemic. Mr Clare said almost 390,000 Australian students started an award course degree in 2024, up four per cent on the previous year. In 2024, total student enrolments reached 1.67 million, with domestic students totalling one million. The Minister also said that attrition rates for domestic undergraduates were at a 10-year low of 12 per cent in 2024.  The numbers of domestic students commencing study in the professions of engineering and teaching were also both up by 10 per cent, Mr Clare said. Enrolments rose in 2020 and 2021, when Covid restrictions drove up unemployment and underemployment, and limited social and travel activities.

Carbon capture underpinning natural gas, says King

Carbon capture and storage (CCS) projects were integral to the use of natural gas in the energy transition, Resources Minister Madeleine King has told a forum in Japan. Ms King said Australia’s 2024 Future Gas Strategy had confirmed that natural gas would keep backing up renewables and powering hard-to-abate industries for some time yet. Speaking in Osaka, Ms King said Australia had huge potential for CCS: 18 commercial-scale CCS ventures were either in operation, proposed or undergoing trial stages. Japan, meanwhile, was targeting 120-240 million tonnes of CO2 storage by 2050, with a ‘storage first’ approach that prioritised developing safe reservoirs and cross border supply chains.