Jim Chalmers’ budget surplus soars to $19b on the back of surging taxes (2024)

Westpac Business Bank economist and former Treasury official Pat Bustamante estimated the surplus would be about $20 billion when the final budget outcome was reconciled after June 30.

The first surplus in 15 years by the Labor government is set to rival the highest ever nominal dollar surplus of $19.8 billion recorded by the outgoing Howard Coalition and incoming Rudd Labor governments in 2007-08.

However, as a share of the economy, which is considered the best way to compare budget results over time as the economy grows and tax rises, this year’s surplus won’t match the 1.7 per cent of GDP recorded 15 years ago. It will be about 0.8 per cent of GDP.

Jim Chalmers’ budget surplus soars to $19b on the back of surging taxes (1)

Economist Chris Richardson said the budget was raining revenue.

“Both company and personal taxes rose to new highs,” he said.

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“The figures are a reminder of how lucky the Lucky Country has been – conditions have thrown money at the taxman.

“Partly that’s as war drove up commodity prices, and partly it’s as inflation took money from the punters and placed it into the pockets of the government and of business.”

But the bigger than expected budget surplus is likely to ramp up pressure from interest groups for Dr Chalmers and Finance Minister Katy Gallagher to spend more of the windfall.

But Ms Gallagher said the surplus would “help us to take some of the heat out of the inflation challenge in our economy, rebuild our fiscal buffers and clean up the mess left to us by the Coalition”.

Dr Chalmers said this week for now it was important to maintain a healthy budget surplus to keep pressure off inflation, while leaving open the possibility of future cost-of-living help depending on the economic circ*mstances.

He said the fiscal performance showed the government could save most of the revenue upgrades and deliver “responsible” cost-of-living support for struggling households, while building a bigger fiscal buffer for future economic challenges.

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The 12-month surplus could be similar to or a bit smaller than the $19 billion recorded in the 11 months to May 31.

June is often a deficit month for the Commonwealth, as public servants spend allocated money to avoid having their budgets cut in future years.

Before June 30, the Albanese government has announced it will prepay states $1.8 billion towards next year’s disaster recovery budget and spend up to $2 billion extra for public housing.

“That sort of shuffling is what the 1996 Commission of Audit tried to stop,” Mr Richardson said.

“Clearly it failed – both sides still do it when it suits.

“Were the federal government to be a publicly listed business, it would rightly get a thumping for such window-dressing moves.”

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With the surplus for this fiscal year locked in, pushing money out the door before June 30 will put the budget in a stronger position for the financial year of 2023-24.

Market economists are tipping there is likely to be another surplus next year, despite Treasury forecasting a $13.9 billion deficit.

“Some of the strength in revenue is coming from the strong labour market and larger nominal economy – they are not one-off drivers,” Westpac’s Mr Bustamante said.

“This means that underlying strength in collections is likely to persist into next year.

“A 2023-24 surplus is looking very likely, should the economy remain resilient and labour market evolve largely as expected.”

The bigger-than-expected surplus is a far better result than the deficit of $78 billion for 2022-23 originally forecast by former Liberal treasurer Josh Frydenberg in April 2022, just before the election.

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Shadow treasurer Angus Tayor said a “drover’s dog could have delivered a surplus this year”.

“The challenge for Labor is whether it can deliver a path to surplus over the forward estimates. Labor’s only plan is to drive the budget back into deficit.”

The Australian Financial Review first reported in April that the government was closing in on the first surplus in 15 years, as surging tax revenue from iron ore, coal and gas, and record numbers of people in work deliver a financial windfall.

Mr Richardson said the budget still faced medium term structural spending pressures, such as from the National Disability Insurance Scheme, aged care, defence and health.

“It doesn’t change the overall budgetary story – good now, challenging later.

“But ‘good now’ has been massively underestimated by official forecasters.”

Prime Minister Anthony Albanese on Friday said the government had a “consistent focus on returning revenue upgrades to the budget and making prudent savings”, to be on track to deliver the first budget surplus in 15 years.

Jim Chalmers’ budget surplus soars to $19b on the back of surging taxes (2024)
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