Australian federal budget set for $100b hit from dwindling mining returns

Australia is reportedly on target to release a significant mid-term budget downgrade due to a sharp decline in mining sector earnings.

According to media reports, federal treasurer Jim Chalmers will announce this week that the government’s mid-year budget update will feature mining earnings more than $100 billion lower than expected, driven by reduced export returns from iron ore, lithium and nickel.

China’s faltering construction sector and a severe decline in a number of commodity prices are also highlighted as having a major impact on the nation’s export earnings.

Tax downgrade

Various media outlets claim the government will downgrade mining export forecasts by more than $100b and company tax receipts by $8.5b over four years.

In an interview with Sky News over the weekend, the treasurer revealed that the mid-term budget numbers in his mid-year economic statement on Wednesday will be significantly lower than the surpluses the government delivered in its first two years.

“There will be substantial pressures on the budget, […] even as we work to tighten the budget in the year that we’re in now,” Mr Chalmers said.

Economic pressures

The treasurer also told the ABC that the mid-year budget update would also reflect persistently weak growth and sticky inflation.

“There are a handful of quite big pressures that we’ve had to account for,” he said.

“What that shows is that the global economy’s uncertain and that’s weighing pretty heavily on our budget and on our economy more broadly.”

Cost-of-living support

According to the treasurer, the lower-than-expected budget numbers will not impact the government’s cost-of-living support.

“The focus for us in that cost-of-living relief is rolling out the relief that we’ve already announced and already budgeted for,” he told the ABC.

“People are still getting energy bill rebates, people are getting those tax cuts, […] cheaper medicines, student debt relief, rent assistance, cheaper early childhood education, getting wages moving again, all of that is rolling out.”

“What it shows is our ability to provide that cost-of-living relief at the same time as we manage the budget in the most responsible way that we can.”

“Those two surpluses that we delivered and our ongoing efforts to get the budget in as good a nick as we can in the face of all of these pressures mean that there is much, much less debt in the budget than we inherited a couple of years ago.”