“So we’ll continue to work on that, but we’re also working on making sure that the budgets got into shape. So it’s a matter of getting that balance right.”
In March, Treasurer Jim Chalmers forecast this year’s budget would show a deficit of $42.1 billion with gross government debt going through $1 trillion. But higher commodity prices and the strength of the jobs market have helped improve the budget.
The 2024-25 budget ended up more than $17 billion stronger than Chalmers had forecast. To the end of September, the budget was $5.3 billion ahead of expectations.
Chalmers is due to deliver the mid-year budget update within the next five weeks. A final decision on extending power subsidies would only need to be made in the few days before the release of the mid-year update.
Albanese said that while getting the balance between the state of the budget and keeping cost-of-living pressures under control was paramount, the government wanted to ensure ordinary people were protected.
“We want an economy that works for people, not people working for the economy,” he said.
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Independent economist Chris Richardson said the government had a choice between good policy by abandoning the energy rebates or good politics by extending them and putting pressure on the Coalition.
He said that while there was an early case for the subsidies to take pressure off consumers, that had now passed.
“My real fear is that the concrete around these are starting to set and we’ll be stuck with them,” he said.
Australian Chamber of Commerce and Industry chief executive officer Andrew McKellar said the government should focus its attention on the underlying issues facing the nation’s energy sector.
“One has to recognise that it’s only ever going to be a temporary measure. It will provide some temporary relief. At some point, those chickens have got to come home to roost,” he said.
“We need long-term solutions. We need to have that investment in future energy supply if we’re going to get more competitive, more affordable energy prices, which business is really looking for.”
ACCI CEO Andrew McKellar says a long-term solution to high power prices is required.Credit: Alex Ellinghausen
Further interest rate relief would also reduce cost-of-living pressures for the third of Australians who hold a mortgage.
But Reserve Bank deputy governor Andrew Hauser on Monday suggested the chances of another rate cut, on top of the three delivered so far this year, were lengthening.
Speaking at a banking conference in Sydney, Hauser said finding ways for the Australian economic “racehorse” to run faster will likely require a lift in productivity driven by greater investment from the nation’s private sector.
He said like a racehorse, the economy may be “trapped against the course fence, unable to surge forward”.
Cutting interest rates would only add to inflationary pressures when the economy needed a lift in productivity to make sure it could grow faster.
“I don’t think you have to be mad, or a fanatic, to think that future rate cuts could be coming,” he said.
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“More plausibly, perhaps, at the moment, you might worry about how much remaining room there is.”
Financial markets, which only a fortnight ago had priced in at least two more interest rates by the end of next year, now believe the bank will keep rates on hold well into 2027.
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