Treasurer flags welfare increases in next week's budget.

The Economic Inclusion Advisory Committee, which was established in 2022 to provide annual pre-budget advice on the adequacy of welfare payments, last month called for a $17-a-day increase to the JobSeeker unemployment payment and related payments.

The committee also called for an increase to Commonwealth Rent Assistance — a fortnightly supplement of up to $250 for welfare recipients who rent — and for more generous indexation of welfare payments.

Mr Chalmers did not indicate which of these the government would pursue in the budget, but said the committee's work was "important, well-regarded [and] well-informed".

"What we've tried to do with the [committee] is to implement what we can afford to implement in a responsible and methodical and sequenced way."

But he ruled out adopting the committee's recommendations in full.

"We can't afford to implement every recommendation put to us by that committee … We need to be more careful because we need to be cognisant of the budget situation and what we can afford."

The government increased JobSeeker and related payments by $40 a fortnight in its last budget and also increased Commonwealth Rent Assistance.

It has also extended the eligibility for the Parenting Payment Single to those with a youngest child aged 13 instead of 8, covering an additional 75,000 single parents.

On Sunday, Finance Minister Katy Gallagher hinted the government might focus on Commonwealth Rent Assistance, which she said was important for the economic security of women.

"Commonwealth Rent Assistance … goes to providing support for many women and many women who are single parents … We look across the board at what is possible, but we've made no secret that we want to make sure that we are driving economic equality for women … part of the answer is the payment system."

No 'slash and burn' in the budget:

Welfare payments are one of several areas earmarked for new budget spending in recent weeks, alongside paid student placements, the Leaving Violence Payment, an investment in quantum computing and over $3 billion in new defence spending.

Senator Gallagher has also promised some spending cuts, including $1 billion saved by reducing the use of consultants in the public service. But she also flagged "unavoidable" spending and said savings were getting "harder to find".

On Monday, Mr Chalmers said the budget would be "Inflation-busting" in the short term, but would also include spending to ease cost-of-living pressures and support economic growth.

"There will be more spent [and] there will be more spending restraint … But this is not the time for scorched earth austerity. It would not be wise when people are doing it tough and when the economy is soft for us to slash and burn in this budget," he said.

He rejected the suggestion that the budget needed to reduce spending overall in the next financial year in order to fight inflation.

"Be very careful about focusing only on the quantity or the magnitude of spending in the budget. There are investments we can make in the budget which can put downward pressure on inflation."

Mr Chalmers has accused market analysts and commentators of an "overreaction" to higher-than-expected inflation figures released in late April.

The Reserve Bank board meet today for the first time since those figures.

Mr Chalmers said Australians would "Watch very closely what the RBA does … I think everybody would acknowledge that the rate rises in the system are putting a lot of people under pressure," saying they had slowed the economy "considerably".

"We are doing our bit, and the Reserve Bank will take its decisions independently."

The RBA decided today to leave the rate unchanged.

Mr Chalmers said the government was on track to deliver its second consecutive budget surplus (spending less than revenue) and had reduced total debt by $152 billion in 2023-24 compared to the near-$1 trillion figure forecast in the Coalition's last budget.

While government spending has increased in each of Mr Chalmers's budgets, debt has reduced owing to hundreds of billions of dollars of unexpected revenue, thanks largely to strong commodity prices and high employment.

The government has so far saved the bulk of that unexpected revenue, but Mr Chalmers has suggested that trend may not continue in this budget.

Original Story By | Tom Crowley