Jim Chalmers will on Monday reveal a $15.8bn budget surplus in an economic update, more than $6bn higher than predicted at May’s federal budget.
The treasurer says the better-than-forecast budget position has come “entirely” from lower government spending, a detail the treasurer highlights as Labor comes under scrutiny from the opposition and the Reserve Bank over concerns that public expenditure is helping to drive inflation.
The 2023-24 final budget outcome, to be detailed by Chalmers and the finance minister, Katy Gallagher, on Monday will confirm the government’s expectation of a second surplus – what Labor points out is the first back-to-back budget surplus in since 2006-07 and 2007-08.
Labor’s 2022-23 and 2023-24 budgets have included surpluses of $22.1bn and $15.8bn respectively. May’s budget had projected a $9.3bn surplus for this financial year, but many economists had predicted that number to end up higher, with more recent updates showing improvements. Monday’s budget update will unveil the final numbers for the year, showing a significant improvement.
The government notes the final budget outcome for this financial year was more than $72bn better than predicted in the 2022 pre-election economic and financial outlook.
“We’re the first government to post back-to-back surpluses in nearly two decades. A second straight surplus is proof of our responsible economic management,” Chalmers said in a statement before the update.
“Our bigger than expected surplus in the year just gone is entirely due to lower spending, with the tax take also lower.”
The treasurer said the surpluses had paid down debt, as well as helping “fight inflation”.
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The Reserve Bank had raised concerns in recent weeks about the effect of “public demand”, or government spending, on inflation figures and its deliberations on interest rates. Chalmers had accused the RBA of “smashing the economy” with rate rises.
Some commentators have pointed to government spending as being a crucial factor in staving off Australia falling into recession, noting falling household demand.
Gallagher said the government was exercising “fiscal discipline” and reducing “wasteful” public spending.
“Posting back-to-back surpluses is a key part of our plan to take pressure off inflation while providing relief to families, who we know are under pressure,” she said.
The government said it had returned 87% of revenue upgrades back to the budget bottom line rather than spending it, and had found more than $77bn in savings since coming to office.
Last week, Chalmers was in Beijing and met Chinese counterparts in a restarted Strategic Economic Dialogue between the two countries. He said he welcomed efforts by China’s government to boost growth in their economy, noting China as Australia’s biggest trading partner.
“This can only be a good thing for Australia, subject to those details, because we know that weakness in the Chinese economy does flow through to our own economic conditions,” Chalmers said.
“Some of the key reasons why our own economy is slowing considerably are global economic uncertainty, of which China is a part, combined with inflationary pressures at home and the impact of higher interest rates.”
