Key Highlights

  • Jim Chalmers says recent budget decisions make a positive contribution over four years.
  • The same decisions added about $14 billion to spending in the near term.
  • The gap between savings and spending is the test for the December MYEFO update.
  • Savings over four years depend on the timing of the measures.

Treasurer Jim Chalmers is promising more savings in December's mid-year budget update, a day after the Reserve Bank lifted the cash rate to 4.85%. One question matters most for households with mortgages: will the update actually reduce spending in the next year or two, when Inflation is the problem? The government's own framing points to the four-year total. Look at the first two years instead and you get a different picture.

That gap between the four-year figure and the near-term figure will sit at the centre of the debate in the weeks before the Mid-Year Economic and Fiscal Outlook (MYEFO), which Treasury is due to release in December.

What Chalmers has said about savings

In a media release on rates day, Tuesday 3 November, Chalmers said: "We've found almost $180 billion in savings since coming to government." He added that "there have been savings in all eight of our budget updates so far" and that "there will be more savings in the mid-year budget update in December".

He also argued that "Budgets aren't the primary driver of prices in the economy, but responsible economic management plays a helpful role."

Earlier that morning he told reporters: "We know that there is more work to do to make the budget as tight as it can be."

The Expenditure Review Committee, the cabinet group that settles spending decisions, met on Monday 2 November and was due to meet again on the Tuesday, reports said.

The fine print: four years versus up front

In an analysis published on 1 November, Clare Armstrong reported that Chalmers had been asked whether MYEFO would bring a net reduction in spending.

The Treasurer replied that net policy decisions in this year's budget and last year's MYEFO made a "positive contribution over the four years" of the budget.

The analysis said that is accurate across the forward estimates. But it noted that for the current and previous financial years, decisions in those two updates added about $14 billion to overall spending.

The distinction matters because the Reserve Bank is trying to slow Demand now. Savings that arrive in 2028 or 2029 do little to ease price pressure in 2026 or 2027.

Explainer: how a package can save and spend at once

Budget updates report "policy decisions", meaning new spending and new savings, year by year across the budget year and three forward years. A "net saving" means the savings outweigh the new spending. What the net figure shows depends on which years you add up.

Hypothetical example: imagine a set of decisions that adds $8 billion to spending in year one and $6 billion in year two, then saves $9 billion in year three and $7 billion in year four.

  • Years one and two combined: $14 billion of extra spending.
  • Years three and four combined: $16 billion of savings.
  • Over the four years: a net saving of $2 billion.

Both statements about that package would be true. It is a "positive contribution over the four years", and it also adds $14 billion of spending up front. These figures are illustrative only and do not represent the actual budget numbers, which Treasury publishes in the budget papers.

Savings can also be booked against spending that was forecast but never committed, so a headline savings tally is not the same as a cut to current outlays.

Pressure from inside Labor and from the Finance Minister

Armstrong's analysis reported that there is "no shortage" of Labor MPs who think the December update has to be different. It said "means testing" and "net savings" are a constant refrain in private conversations among MPs.

The same analysis said the era of energy bill rebates and cuts to fuel excise appears to be over, and that the debate has moved to how public spending can be reduced to help the Reserve Bank.

Finance Minister Katy Gallagher would not commit to net savings when asked on Tuesday. "They need to be taken thoughtfully and carefully through our processes and they will be," she said, according to reports. She also said: "We've repaired the budget. We've found those savings."

One test is the National Disability Insurance Scheme. Changes announced in April were designed to save $38 billion over four years. The scheme actuary, Guy Thorburn, described the projections as within the "range of reasonably likely outcomes" but noted "considerable uncertainty regarding the actual level of future Scheme expenses". Gallagher said: "Absolutely we have to deliver those savings."

Why the rate rise sharpens the question

The RBA board voted six to three on 3 November to raise the cash rate by 25 basis points to 4.85%, its third increase this year. The three dissenting members preferred to hold at 4.60%.

In his release, Chalmers pointed to the Middle East conflict. He said the RBA's August forecasts "assumed oil around $81 a barrel", while prices "have been above $110 in recent weeks".

The government says global energy costs, not its own spending, are driving the latest inflation spike. The Coalition argues the opposite, and shadow treasurer Tim Wilson has linked persistent inflation to federal spending. MYEFO is where those competing claims will be tested against numbers.

For households, the mechanics are indirect. If government spending in the near term is seen to add to demand, the RBA may judge that rates need to stay higher for longer. If the update delivers net savings in the current and next financial years, that argument weakens.

Nothing in the MYEFO debate changes legislated tax settings. The lowest Personal Income tax rate fell from 16% to 15% on 1 July 2026 and is legislated to fall to 14% from 1 July 2027.

What to watch

  • MYEFO in December 2026. No exact release date has been announced. Look for the table of policy decisions and whether the net figure is positive or negative in 2025–26 and 2026–27, not just over four years.
  • Whether the government uses means testing on any payments or concessions, a step some Labor MPs reportedly favour.
  • Updated oil price and inflation assumptions, given Chalmers' comments about the gap between the RBA's August forecasts and current prices.
  • Progress on the NDIS savings and whether the actuary's uncertainty is reflected in revised estimates.
  • The RBA's next decisions and updated forecasts, which may indicate how the bank views the contribution of public spending to inflation.