Today's federal budget will be $42 billion better off, new details reveal, but conditions may worsen over the coming two years with minimal cost-of-living relief.
Chief Political Editor for 9News Charles Croucher said Treasurer Jim Chalmers has to walk a "perilous path" as he manages a waning economy while attempting to ease household budgets.
Although the deficit has shrunk to just under $36.9 billion, which is under the $78 billion shortfall predicted in March this financial year, it is still posing "a big problem", Croucher said.
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"The problem the Treasurer has outlined is we are approaching that trillion dollar in debt for the nation," Croucher said.
"If you go back to the cupboard, you are going to dig deeper into that debt, and if you go back to the cupboard and start handing out money it will fuel inflation.
"That will make things harder again.
"That is the perilous path that the Treasurer has to walk".
Croucher said people expecting big cash handouts "will be disappointed".
"There is no big splashy spending that we've become used to. No huge cuts either," he said.
"Instead, the Treasurer will point to things like childcare subsidies, which is one of Labor's big election promises. That will be funded.
"There is also an extension to the paid parental leave scheme that will be available to more families and stretch from the 18 weeks as it currently stands to 26 weeks.
"That happens over a few years, though."
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Chalmers will hand down the annual accounts in an economic environment where everyone's wallets are getting tighter: interest rates are going up, inflation is soaring and real wages are remaining low.
The first federal Labor budget in almost 10 years has three goals: addressing the nation's debt, funding the Albanese government's election promises and providing cost of living relief.
Almost $10 billion will be spent on nationwide infrastructure projects. And there will be $5 billion set aside for cheaper childcare – a major Labor election pledge.
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Other spending priorities will be cutting the cost of medicines on the PBS and more cash for pensioners.
Education will also benefit as the government tries to address critical skills shortages.
Prime Minister Anthony Albanese has played down offering major cost of living relief, particularly cash hand outs that would fuel inflation.
And the improvement to the budget bottom line is expected to be short lived.
Chalmers is tonight expected to warn that stubborn high inflation and global uncertainty will impact the economy over the next two years.
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