The budget bottom line is facing the same hit from higher interest rates as the household budgets of ordinary mortgage payers, the treasurer says.
Soaring interest rates on record levels of government debt will punch a $13 billion hole in the budget, with taxpayers poised to spend more on interest repayments than assistance to families or people with disabilities.
At the time, interest rates on government debt were assumed to average 2.2 per cent over the next four years. But since then, interest rates around the world have skyrocketed due to growing concerns about inflation.That increase will this year translate into the government paying $19 billion in interest on its debt compared to the $17.9 billion forecast in March. In 2025-26, the government now expects to pay an extra $5.4 billion.
Chalmers said the government was now on track to spend $99.1 billion in interest in the four-year period from 2022-23 to 2025-26 compared with the March forecast of $86.1 billion.Over that same period, the government is expected to spend $85.9 billion on family assistance payments and $80.9 billion on payments to people with a disability.
Chalmers said that by 2032-33, the government could be spending an extra $18 billion a year in interest.The treasurer, who is due to give an update on the economy and budget when parliament resumes on July 26, will hand down a fresh 2022-23 budget in October. Three months ago, it was tipping the key 10-year bond interest rate to average 2.2 per cent this financial year and next. It is now forecasting them to average 3.6 per cent in 2022-2 and 3.3 per cent in 2023-24.
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