Responsible economic management is the hallmark of the Albanese Government’s first term and it’s the focus of the mid‑year budget update we’ve released today.

These figures show an improvement in the bottom line for this year since the Budget, and a big improvement to the bottom line since the election.

The deficit for this year is now $1.3 billion smaller in this budget update, and almost half the $47.1 billion deficit we inherited for this year from our predecessors.

We’ve delivered two surpluses in our first two years and now a much smaller deficit in our third.

Despite the pressures coming at us, we’re on track for a soft landing and our budget strategy is helping.

Our economy is growing, inflation is moderating, real wages are growing, unemployment is low, more than one million new jobs have been created, we’re rolling out tax cuts and cost‑of‑living help to help people doing it tough, and there’s now much less debt than when we came to office.

We’ve turned two big Liberal deficits into two substantial Labor surpluses and we’ve shrunk the deficit again this year.

• The deficit this year is now almost half what we inherited, at $26.9 billion it’s $1.3 billion lower than Budget and $20.1 billion lower than PEFO.
• The budget position is $27.1 billion better over the four years to 2027–28, compared to what was projected at PEFO.
• The overall budget position is almost $200 billion better over the six years to 2027–28 compared to what was projected at PEFO.
• By comparison, the budget position was $140 billion worse in the first six years of the former Government compared to the 2013 PEFO.

The Albanese Labor Government has delivered the biggest ever budget turnaround in a parliamentary term due to a combination of limiting real spending growth, identifying savings and banking the majority of revenue upgrades since we came to office.

• Average real spending growth will be 1.5 per cent over the six years to 2027–28, which is less than half the 30‑year average and around a third of our predecessors.
• We have identified $14.6 billion in savings and reprioritisations, with a total of $92 billion since the election.
• We have returned 78 per cent of upwards revisions to revenue since the election, compared to our predecessors who averaged around 40 per cent.

A better budget position means less debt and interest costs, and that’s what we’re delivering.

• Gross debt is forecast to be $177 billion less than what we inherited this year, helping us avoid around $70 billion in interest costs over the decade.
• Our predecessors drove gross debt to around 40 per cent of GDP and they expected it to stay there until the end of the medium term.
• Gross debt is forecast to peak at 36.7 per cent of GDP, which is 8.2 percentage points lower than projected at PEFO.

While we’ve managed to deliver a substantial turnaround in the nation’s finances since coming to government, global uncertainty and other pressures have driven some slippage to the bottom line since the Budget.

The slippage in subsequent years is largely because of urgent, unavoidable or automatic increases in spending in areas like pensions, Medicare and medicines.

This mid‑year update includes $8.8 billion in unavoidable spending, taking the total since coming to Government to $47.6 billion.

We’ve also had to account for $16.3 billion in payment variations to ensure veterans receive their entitlements, to index pensions, to increase support to families, to support disaster recovery and support increased demand for health services.

Our economic plan is all about fighting inflation without ignoring the risks to growth, delivering cost‑of‑living relief and building a more productive and resilient economy.

Through the mid‑year budget update, the Albanese Labor Government is:

• Easing cost‑of‑living pressures – by rolling out responsible cost‑of‑living relief, building a universal early childhood education and care system, boosting housing supply, supporting students and graduates and helping consumers get a better deal.
• Investing in a Future Made in Australia – by backing cleaner and cheaper energy, establishing a Front Door for investors and reforming our education system.
• Strengthening Medicare and the care economy – by supporting the care workforce, making healthcare and medicines more accessible and affordable, and improving the quality and sustainability of aged care and disability services.
• Broadening opportunity and advancing equality – by advancing gender equality, supporting legal assistance for vulnerable Australians, promoting Aboriginal and Torres Strait Islander economic empowerment, broadening labour market opportunities and looking after Australia’s veterans.
• Safeguarding our people and environment – by responding to changes in technology and the global economy to ensure Australians remain safe at home, abroad and online, protecting the environment and boosting the resilience of communities and our region.

We know that growth in our economy has slowed more than we expected at the budget due to a combination of higher interest rates, cost‑of‑living pressures and global economic uncertainty.

That’s why our economic plan is all about fighting inflation without ignoring the risks to growth.

The Australian economy is on track for a soft landing, with the economy continuing to grow, a record for jobs created in a Parliamentary term, participation near record highs, real wages and household incomes growing again, the gender pay gap narrower than ever before and business investment at decade highs.

Our responsible approach has seen fiscal policy work alongside monetary policy to return inflation to the target band for the first time since 2021 and our fiscal settings continue to be consistent with sustainably returning inflation to target.

At the same time, we’ve made important investments in our future growth and delivered cost‑of‑living help for Australians, including a tax cut for every taxpayer and help with energy bills for households and small businesses.

The recovery in our economy is being supported by a return of real income per capita growth.

After going backwards 1.6 per cent at the time of the election, real incomes are growing again, driven by the Government’s cost‑of‑living tax cuts, together with moderating inflation and continued jobs and wages growth.

It’s not mission accomplished because people are still under pressure, but we’ve made welcome progress and we know Australians would be worse off if it weren’t for our cost‑of‑living relief, support for essential services and responsible economic management.

We’ve made good progress on budget repair, but we’ve got much more to do to make up for a decade of waste and mismanagement under a Coalition who couldn’t deliver a single surplus in nine tries.

We’ll continue to put a premium on responsible economic management with a focus on fighting inflation without ignoring risks to growth, repairing the budget, rolling out responsible cost‑of‑living relief and building a stronger economy into the future.

As at 18 December 2024.