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Finance Minister Katy Gallagher said the government’s audit of department spending and grants programs is continuing in the May 14 budget.Credit:Alex Ellinghausen

“Since the election we’ve found $50 billion in savings and reprioritisations. We’ll continue to find savings in the 2024-25 budget as part of our ongoing task of managing the budget responsibly and in the interests of all Australians,” she said.

“Looking across government for responsible savings to reinvest in higher quality spending is what Australians expect a responsible government to do.”

The federal governmentfound $22 billion of savings or funding redirections in the 2022-23 October budget,including $2 billion in cuts to grant programs such as the commuter car park fund and the axing of the$5.4 billion Hells Gate dam project.

The federal government subsequently found $17.8 billion in savings and reprioritisations in the 2023-24 budget,and another $9.8 billion in the 2023-24 Mid-Year Economic and Fiscal Outlook late last year.

EY chief economist Cherelle Murphy said it was welcome to see that the government had an eye on removing waste from the budget,but they were signalling some additional spending in significant areas including defence and theFuture Made in Australia program.

While economic conditions were in many ways better than they were a year ago,Murphy said inflation – currently at 3.6 per cent – was still not to be taken lightly with price rises in some areas soaring at their greatest rates in decades.

“They really have to be very careful about where they put extra demand in the economy,” she said.

Additional support for households doing it tough in the face of high interest rates would also just undo the work of the Reserve Bank,Murphy said.

Dr Aruna Sathanapally,CEO of the Grattan Institute,Dr Angela Jackson,National Chair of the Women in Economics Network,and Besa Deda,Chief Economist of Westpac’s Business Bank at the Nationa Press Club on Wednesday.Credit:Alex Ellinghausen

Besa Deda,chief economist of Westpac’s Business Bank,said the economy was not where the federal government or Reserve Bank hoped it would be six months ago:there are fears inflation is stickier than previously anticipated,and the chance of multiple interest rate cuts later this year is all but gone.

“So the problem for the federal government is they cannot deliver a budget that will boost aggregate demand. At a time when inflation is still elevated ... and run the risk that rate relief might take even longer to calm,” Deda said at the National Press Club on Wednesday.

Angela Jackson,lead economist at Impact Economics,said these were difficult economic times and it was not possible for the government to spend its way out of the challenge.

“Inflation is a truly wicked problem,but we can mitigate against the worst of these impacts through smart and targeted investments and reforms which enhance economic inclusion,” said Jackson,who is also a member of the government’s Economic Inclusion Advisory Committee.

Last week,the committee recommended increases to Commonwealth Rent Assistance and working-age welfare payments,but Jackson said the recommendations were not necessarily designed to be adopted in the upcoming budget in full.

“It is a building block type of situation and we did see them pick up a number of the reforms from last year,” she said on Wednesday.

“I have no notion of what will be in the budget,but I hope we see more in the budget in two weeks’ time.”

Arun Sathanapally,chief executive of the Grattan Institute,said one of the major challenges
for the federal government was the structural budget deficit,and the federal government should consider tax reform to help.

“Whether or not we see a surplus in two weeks,Australia is not raising enough revenue for what we spend,” she said.

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