Treasurer Jim Chalmers will deliver back-to-back budgets with positive results, and new forecasts of the nation’s finances will show a surplus of $9.3 billion for the current fiscal year.
But even with the significant change since the mid-year budget update (MYEFO) forecast a minuscule $1.1 billion deficit just six months ago, the budget will fall back into the red from the next financial year as the Rising spending and rising unemployment hit the bottom line.
Each of the next three years will have larger deficits than the government had previously projected, thanks to what it calls “inevitable spending.”
The exact figures for those deficits have not yet been revealed, however, in December they were forecast to be $18.8 billion, $35.1 billion and $19.5 billion.
Treasurer Jim Chalmers will deliver back-to-back budgets with positive results, and new forecasts of the nation’s finances will show a surplus of $9.3 billion for the current fiscal year.
Announcing the result, Chalmers said the projected surplus had not come at the expense of expected cost-of-living relief.
“Another surplus is a powerful demonstration of the Labor Party’s responsible economic management, leaving room for cost-of-living relief and investment in the future,” he added.
“Despite the substantial progress we have made, pressures on spending continue to intensify and there is more work to be done to clean up the mess left by the Coalition.”
While the projected deficits for the next three financial years are not yet known, they are expected to exceed the combined $73.3 billion deficits projected under MYEFO.
Indeed, skyrocketing NDIS costs, the interest bill on public debt, health and aged care spending, and record defense spending will put further pressure on the budget bottom line in the short term.
The budget situation, however, will be stronger in 2027-28 compared to December forecasts that showed the budget still in the red.
“We have prioritized responsible economic management that strikes the right balance between strengthening the budget and funding our priorities,” said Finance Minister Katy Gallagher.
Boosted by rising revenue windfalls due to Australia’s red-hot labor market, still-elevated commodity profits and strong corporate tax revenues, Treasury coffers have swelled since Labor came to power.
Had it not been for the Commonwealth’s increasing tax collection, the budget would have recorded a structural deficit.
Most of this financial year’s revenue will go towards reducing the budget bottom line, with 96 per cent of the revenue improvements being banked. The remaining funds will cover increases in government payments.
To help rising spending demands, Labor has already announced it will repurpose $23.1 billion of previously allocated funds and save $1 billion by reducing the government’s reliance on consultants.
An additional $3.8 billion in savings and reprioritizations will be revealed on budget night.
Despite improvements to this budget’s bottom line, gross debt is still expected to exceed $1 trillion over the four-year forward estimates period, a threshold Chalmers regularly criticized the then-Morrison government over during his stage in the opposition.
