Federal government spending grew more than twice as fast as forecast last financial year, fuelling economists’ concerns that promises of budget restraint are falling short of reality and intensifying calls for Treasurer Jim Chalmers to tighten the purse strings.
The final budget outcome for 2025-26, released last week, showed real federal government spending increased 4.3 per cent last financial year, more than double the projection of 1.8 per cent growth contained in the 2024-25 budget, prepared just two years earlier. The figures are adjusted for inflation.
The data underscored growing concerns about the recent sharp rise in federal government spending.
Other than during the pandemic, spending has hit a four-decade high, a surge many economists argue is making the Reserve Bank of Australia’s fight against inflation harder.
The added expenditure means the budget is projected to remain in deficit for the foreseeable future, and debt will continue to rise.
Chalmers, speaking in Tokyo on Monday after meetings with Japanese investors and business leaders, said the government would continue to look for savings, with a new package to be included in the mid-year budget update before the end of the year.
“The budget settings aren’t a primary driver of pressures in our economy, but we can and will continue to play a helpful role in the fight against inflation,” said the treasurer.
AMP chief economist Shane Oliver said annual real spending growth had averaged 4.2 per cent over the past three financial years, double the average rate of growth in the decade before the pandemic.