Almost $10 billion in savings and spending changes have been clawed back as part of the mid-year federal budget review.

The savings and reprioritisations include billions slashed from the federal infrastructure pipeline last month, the finance minister said on Tuesday.

Katy Gallagher said the federal government was trying to get the budget in “much better shape” for other spending priorities such as its response to the robodebt royal commission.

The $22 million in funding will cover more face-to-face service support options and a raft of other reforms recommended by the investigation into the unlawful automated debt collection tool.

Other areas of new spending include $1.5 billion to wrap up the pandemic event visa, which was introduced during COVID-19 to enable temporary visa holders to stay in Australia and work while international borders were closed.

In the lead-up to the release of the mid-year economic and fiscal outlook, Senator Gallagher said work to identify money that could be returned to the budget or redirected was ongoing.

“Our focus is really on making sure we’re being fiscally responsible in this environment when inflation is high, and repairing the budget we inherited,” she told ABC Radio on Tuesday

In total, the Labor government says $49.6 billion in savings and reprioritisations have been delivered since the 2022 election.

Due for release on Wednesday, the mid-year update to the 2023/24 budget released in May is expected to reveal a substantially improved bottom line.

Treasurer Jim Chalmers has played down the prospect of a second year in the black for the 2023/24 financial year, although a smaller forecast deficit than the $13.9 billion predicted in May can be expected.

In 2022/23, a $22.1 billion surplus was delivered – well more than the $4.2 billion predicted in the budget – after sky-high commodity prices and a strong labour market beefed up revenues.

Several economists, including the team at Westpac, expect the budget to remain in the black this financial year.

In a client note, the bank’s economists said revenue in October was $8.4 billion ahead of forecasts “on upsides to population, jobs, and commodity prices”.

On current policy and program costs, the bank’s economists are expecting another year in surplus, and note that Treasury’s cautious estimates on future commodity prices mean its predictions tend to be conservative.

Rich Insight economist Chris Richardson said the federal budget was still benefiting from fortunate economic conditions, namely higher prices for “the stuff Australia sells to the world”.

The budget expert said Treasury should be adding $100 billion in revenues in the four years to 2026/27 but most likely would not as it “prefers to dribble out the good news”.

Mr Richardson said the “budgetary luck” would not last, with federal finances still facing long-term structural pressures.

Interest payments are now the fastest-growing area of expenditure due to ballooning borrowing costs, Treasury confirmed earlier in the week.

Other rapidly growing spending areas include the National Disability Insurance Scheme, hospitals, aged care and defence.

The intergenerational report, released in August, found an ageing population was expected to put pressure on the nation’s finances as a shrinking pool of workers was tapped for the extra spending needed for aged care and health.

Poppy Johnston and Kat Wong
(Australian Associated Press)