‘Big five’: Treasurer’s grim warning

The Treasurer will detail the “big five” cost blowouts facing the federal government in a speech on Friday as he prepares to deliver his first budget in 18 days.

Over the next four years, hospital spending will increase by 6.1 per cent, aged care costs will rise by 5.5 per cent and defence spending will grow by 4.4 per cent.

National Disability Insurance Scheme spending is forecast to increase by 12.1 per cent per year over the same period.

And interest payments on government debt will rise by about 14 per cent a year.

Mr Chalmers will reveal that Treasury has downgraded its forecasts for global growth by 0.75 per cent this year, a full percentage point in 2023 and 0.50 per cent in 2024.

Global economic activity is set to be $US2 trillion ($A3.1 trillion) lower by the end of 2024 than expected.

Mr Chalmers will speak at a Queensland government investment forum after a week in which he revived debate over the controversial third tranche of tax cuts.

The stage 3 cuts will be the biggest expense to the budget when they come into effect in 2024, with an estimated cost of $243bn over the next decade.

The policy will abolish the 37 per cent bracket that applies to income between $120,000 and $180,000 and mean anyone earning between $45,000 and $200,000 will pay only 30 cents of every dollar they earn in tax.

The 45 per cent tax rate would shift from incomes of $180,000 or more to incomes of $200,000 or more.

Mr Chalmers has encouraged debate over whether Labor should break its promise and dump or amend the cuts, which critics say are not affordable or equitable and will cost more than $20bn a year.

Labor supported the Morrison government to legislate its three-tier tax relief package in 2019, with the party now divided over whether it should break its election promise to keep the cuts.

Labor said in July last year it would deliver the same legislated tax relief as the Coalition if it formed government.

Mr Chalmers will reiterate his recent warnings about the deteriorating global economic outlook and the “brutal” interest rate hikes imposed by central banks to counteract inflation.

He will say Australia isn’t immune to these challenges and that the federal government “must be serious about rebuilding our budget buffers”.

“The fiscal position we find ourselves in means that we will have to make some difficult decisions with this budget, difficult decisions for difficult times,” he will say.

“The right calls for the right reasons, following the responsible path; not the path of least resistance.”

Mr Chalmers will deliver his speech before he flies to Washington for a G20 meeting with finance ministers and central bank governors from around the world.