Treasurer Jim Chalmers rejects calls to cap government spending

Australian Treasurer Jim Chalmers has declined to set a specific cap on government spending as a share of GDP, despite pressure from economists and the opposition to implement fiscal discipline to combat inflation.

In the most recent financial year, government spending reached 26.9 per cent of the economy, the highest level since 1986-87, excluding the pandemic period. The budget deficit of $22.2 billion is projected to increase to $31.5 billion this financial year. Chalmers argued that those calling for cuts should specify which areas to reduce, noting that pressures in the care economy and defense spending are increasing.

Finance Minister Katy Gallagher is reportedly working on potential savings to be presented in a mid-year budget update due in early December. Meanwhile, economic concerns persist as financial markets price in a 60 per cent chance of a fifth interest rate rise by the Reserve Bank in November, and economists warn of a potential recession amid rising oil prices.