The final budget outcome for 2022–23 released by Treasurer Jim Chalmers on Friday has shown a surplus of $22.1 billion, equivalent to 0.9 per cent of Australia’s GDP.
Marking the first surplus in 15 years and the largest ever in dollar terms, the result stands in contrast to the $77.9 billion deficit forecast by former treasurer Josh Frydenberg last year.
This $100 billion turnaround in the budget’s bottom line was celebrated by the Albanese government as the biggest nominal budget improvement in Australian history.
At the 2023–24 federal budget in May, Dr Chalmers forecast a “small” surplus of $4.2 billion or 0.2 per cent of GDP for 2022–23, thanks to a surge in revenue on the back of higher iron ore, coal, and gas prices, alongside low unemployment and wage growth.
But the final budget outcome confirmed that tax receipts were $13.9 billion higher than expected, which was said to have been primarily driven by strong company tax returns.
“This is a huge turnaround from a deficit of $99 billion projected for 2022–23 just less than two years ago and is a far better situation than most other comparable countries that remain in deficit,” commented AMP chief economist Shane Oliver.
“That said, given the strength in commodity prices, the budget should be in surplus!”
Speaking on ABC’s News Breakfast on Friday, Dr Chalmers attributed the “massive turnaround” to the government’s responsible economic management.
“We’ve got the budget in much better nick, at the same time as we’re rolling out billions of dollars in cost‑of‑living relief for Australians who are doing it tough,” he said.
However, the Treasurer also told reporters in Canberra on Friday that the government is still anticipating a budget deficit in the current and upcoming financial years.
“Obviously there is lots that can happen between now and when we hand down the budget next May. There’s an element of unpredictability when it comes to revenue at the moment because the global economic environment is uncertain, particularly in China, and because the full impact of these interest rate rises has not yet bitten in our economy,” he said.
“For all of those reasons, we update our revenue forecasts in MYEFOs and in budgets, and we’ll do that. But we’re not currently anticipating a second surplus for the time being.”
The government indicated that it returned 95 per cent of upward tax revisions to the budget bottom line in 2022–23 versus the 40 per cent average of the former government.
This helped to reduce gross debt by $87.2 billion compared to the former government’s forecasts, avoiding approximately $12 billion in interest payments over five years.
“By banking most of the revenue upgrade when the inflation challenge was at its peak, our responsible economic management has reduced pressure on the cost of living and interest rates,” Dr Chalmers and Finance Minister Katy Gallagher said in a joint statement.
“The surplus is not an end in itself, rather it’s a stronger foundation which puts us in a better position to confront the uncertainties ahead.”
Dr Chalmers and Ms Gallagher also acknowledged that structural pressures are intensifying on the federal budget, including from the NDIS, health, aged care, defence, and interest payments.
“It will take more than one year or one parliamentary term to put the nation’s finances back on a more long‑term sustainable footing, but we are making progress,” they said.
“The Albanese government remains focused on dealing with the immediate challenges Australians are facing, while at the same time building a stronger, more productive, and more resilient budget and economy.”
The intergenerational report released last month predicted that the federal budget will be in deficit for the next 40 years.
But government spending on the age pension is forecast to fall as superannuation becomes the primary source of retirement income for many, a trend that the report said will “contribute significantly to the sustainability of the budget”.
