Many of the budget’s underlying assumptions are hostage to Trump’s plans to impose reciprocal tariffs on America’s trading partners from April 2, a day Trump has labelled “liberation day”.
Albanese is expected to call the election within a week for either May 3 or May 10, placing the government into caretaker mode when the next round of tariffs are revealed, which would hamper official response.
Prime Minister Anthony Albanese is expected to call an election within the week, to then be held in early May.Credit: Chris Hopkins
Albanese revealed Australian officials had been in contact with US counterparts over the weekend in a bid to fend off the tariffs.
“We were engaged over the weekend again in some of those discussions that have taken place,” he said on Monday.
“My ministers are engaged, our people in the United States are engaged as well. We’re advancing Australia’s national interest.”
The US last month signalled the nations most likely to be affected, with Australia noted alongside Canada, the European Union, India, Japan, China, Britain, Brazil and South Korea. Almost all are members of the G20, an organisation made up of the world’s 20 largest economies.
A senior government source, speaking on the condition of anonymity, said the government was still on edge about what would happen on April 2, especially after Australia was name-checked by American officials for possible tariffs.
“Until they make a decision, we don’t know what to believe,” they said.
Chalmers has already revealed Treasury analysis of Trump’s 25 per cent tariffs on steel and aluminium imports which began this month. The analysis found the Australian economy would suffer a marginal direct impact only by 2030, but the tariffs would ultimately detract around 0.1 per cent of growth as they filtered through the global economy.
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A bigger blow could come from the hit to global growth from a trade war between the major world powers, given that any slowdown in the Chinese economy would reduce demand for Australian exports ranging from coal and gas to iron ore and food.
The White House signalled on the weekend that countries with trade deficits with the US, and that do not impose tariffs on the US, might be spared from the reciprocal tariffs, according to a news report by Bloomberg.
While Australia might qualify for exemptions under that approach, the federal budget forecasts acknowledge the uncertainty around the conflict on trade.
Financial markets expect the Reserve Bank to deliver two further rate cuts by year’s end. That would take the official cash rate down to 3.6 per cent and, with the February rate cut, reduce repayments on a $600,000 mortgage by almost $300 a month.
Chalmers will reveal total government gross debt is expected to peak at 37 per cent of GDP in coming years, with a cumulative improvement of $207 billion to the bottom line compared to where then-treasurer Josh Frydenberg forecast the budget to be in early 2022.
The budget will confirm a saving of $60 billion in interest payments on total government debt over the 11 years to 2032-33. However, it will also confirm gross debt will cross the $1 trillion mark for the first time on record in the coming 2025-26 financial year.
That debt will be driven by expected budget deficits over the next four years. Economists are forecasting a deficit of around $20 billion in 2024-25, blowing out to around $40 billion next year.
This follows a surplus of $15.8 billion last financial year.
Chalmers said that decisions to cut spending and save revenue surprises had improved the budget.
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“This budget puts a premium on responsible economic management, helps finish the fight against inflation and eases the cost of living for Australians,” he said.
“By getting the budget in better nick, we’ve been able to find room to help with the cost of living, strengthen Medicare and invest in the future.”
Shadow treasurer Angus Taylor said the government should use the budget to focus on ways to lift living standards of Australians, which have fallen by 6 per cent since the 2022 election.
