What to expect in today’s MYEFO, according to Jim Chalmers

Today (Wednesday 17 December), Treasurer Jim Chalmers and Finance Minister Katy Gallagher will hand down the Mid-Year Economic and Fiscal Outlook (MYEFO), a window into how the government’s finances have been tracking since the federal budget was released in March.

Writing for The Australian Financial Review, Treasurer Jim Chalmers said that the MYEFO would include $20 billion in additional savings and reprioritisations to improve the budget bottom line. He added that the economic forecasts would reflect growing momentum in the economy.

“The mid‑year update will confirm our economy continues to gather momentum in the face of substantial global uncertainty,” Chalmers wrote.

“An important feature of this is the private sector recovery that we’ve been planning for and preparing for, which is really starting to take shape.”

The budget update would also include an additional $6.3 billion for disaster relief as previous disasters proved to be “more costly” than expected, $3 billion in support for seniors on the age pension, $2.1 billion for military superannuation schemes and $2 billion for veterans, Chalmers said.

“We take our responsibilities to veterans and older Australians very seriously and we’ll always make room in the budget to do the right thing by people and that’s what we’ve done in the mid‑year update,” he said.

Chalmers added that the government had delivered $114 billion in savings since coming into office, but economists and tax professionals have warned that deficits would remain entrenched over the medium term without greater reform action.

Last week, Deloitte Access Economics’ budget monitor projected that the 2025–26 underlying cash deficit would come in at $38.9 billion. The gap between revenue and spending was also forecast to worsen over the forward estimates, leading to an underlying cash deficit of $44.6 billion in 2028–29.

Without substantive reform, Deloitte warned that Australia’s economy would be stuck in a structural deficit due to escalating spending pressures and an outdated tax system.

Essential spending areas, including defence, NDIS, aged care, health and interest costs, were outpacing revenue at an “unsustainable rate,” the report found.

Previously, Commonwealth Bank economists had warned that these structural pressures, combined with a weaker outlook for commodity prices, would continue to put pressure on the budget.

“In the medium-term, structural pressures on the Budget will continue to build. The era of large revenue upgrades from commodity prices appears behind us and spending pressures remain evident in several areas,” the economists said.

To address this, tighter spending controls and substantive tax reform would be necessary, according to Deloitte.