A second budget surplus is "within striking distance" but there is no additional cost-of-living support despite the improvement in government finances, Treasurer Jim Chalmers says.
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The latest budget update shows a massive revenue windfall and almost $10 billion of savings and re-prioritised spending has helped reduce the budget deficit to $1.1 billion this financial year.
Unveiling a significant improvement in government finances since May, Treasurer Jim Chalmers and Finance Minister Katy Gallagher said the deficit for 2023-24 will be $12.8 billion less than had been expected, and would be $16.3 billion smaller than forecast in 2024-25.
What this means for you
- No extra cost-of-living relief
- Govt in "striking distance" of second surplus
- Govt will save $145 billion by paying down debt faster
Sustained high commodity prices and the resilience of the labour market has fed speculation that the government will unveil a second consecutive budget surplus in May, and Dr Chalmers did not rule it out.
"We are not yet forecasting a second surplus but we are within striking distance," he said. "We have given ourselves a chance, but we aren't there yet."
The Treasurer said the government was being "deliberately cautious and deliberately conservative" in its revenue forecasts, including for commodity prices.
Nonetheless, the ministers said that over the four years to 2026-27 the budget balance was expected to improve by a cumulative $39.5 billion.
Most of the gain will be due to a massive $64.4 billion increase in revenues, driven by the effects of strong commodity prices, the lift in personal income tax receipts from high employment and bracket creep and robust company profits.
Dr Chalmers and Senator Gallagher said 92 per cent of the tax windfall received since the May budget had been saved, lowering the government's net debt and saving $145 billion in interest payments over 12 years to 2033-34.
'Australians doing it very tough'
Despite the improved financial position, the Mid-Year Economic and Fiscal Outlook did not include any additional living cost relief for embattled households.
Instead, the ministers emphasised the support from measures currently being implemented and the progress that had been made in lowering inflation.
"We know many Australians are doing it very tough, but welcome and encouraging progress is being made when it comes to the fight against inflation and in the economy more broadly," Dr Chalmers and Senator Gallagher said, pointing to low unemployment, strengthening wages growth and high levels of workforce participation.
The Treasurer said the MYEFO was "effectively a stocktake rather than a long list of brand new measures".
He did not rule out further assistance in the May budget but said improving government finances was an important contribution to reducing living costs.
"An important part of this fight against inflation is making sure that we're running a really tight ship when it comes to the budget," he said.
In addition to energy bill relief, expanded bulk billing, cheaper prescriptions, child care support and other measures, the government was also investing in health, skills, infrastructure and housing and reforming immigration and competition polices.
"We're engaged on this fight against inflation on every front. And a really important part of that is making sure that the budget is as good as it can be," Dr Chalmers said.
Shallower downturn ahead
The government has upgraded its forecasts for the economy, predicting growth to reach 1.75 per cent this financial year - a 0.25 percentage point improvement from May - but still expects 2.25 per cent expansion in 2024-25.
The unemployment rate is still tipped to reach 4.5 per cent in 2024-25 but inflation is expected to take longer to moderate, slowing to 3.75 per cent this financial year instead of 3.25 per cent as forecast in May before slipping to within the central bank's 2 to 3 per cent target band in 2024-25.
Overall, Treasury predicts a return to real annual wage growth this financial year.
"The mid-year budget update shows the Albanese government has found a way to repair the budget at the same time as we roll out tens of billions of dollars in cost-of-living help and invest in skills, Medicare, energy and housing and other priorities," the ministers said.
"Our responsible economic management is all about helping Australians through these tough times at the same time as we set our country up for the future."
KEY SPENDING SINCE THE MAY BUDGET
- $6.5 billion for housing supply increase measures
- $313 million over three years for better targeting of employment services
- $392.5 million ongoing response to COVID
- $3.47 billion over four years in PBS new and amended listings
- $11 billion over the decade in extra infrastructure spending
- $254 million for agricultural pest and disease preparedness and response
- $150.7 million over six years for Murray-Darling reforms
- $180.3 million over four years for water infrastructure
- $186.6 million over two years for Ukraine support
- $575.5 million over 11 years for AUKUS nuclear-powered submarine program
- $285 million over three years for new Bushmaster vehicles
- $145.5 million for Digital ID system
- $596.1 million over four years response to aged care royal commission
- $184.9 million cancer nursing and navigation program
- $483.7 million over six years for mental health programs
- $389.2 million over four years for immunisation program
- $200 million over four years for sporting clubs
- $300.1 million over five years for the cyber security strategy
- $254.8 million over two years to respond to High Court bridging visa case
- $511.3 million over two years for NDIS
KEY SAVINGS/REVENUE SINCE THE MAY BUDGET
- $7.4 billion from reprioritising infrastructure spending
- $349.1 million over three years in extra passport fee revenue
- $500 million to deny deductions for ATO interest charges in 2026/27
- $525 million over four years in extra foreign investment fees for housing
- $1.2 billion in space program savings
- Personal income tax receipts expected to be up $9 billion in 2023/24 and $30 billion over four years
- Income tax withholding has been revised up by $5 billion in 2023/24 and $15.9 billion over four years
- Company tax receipts have been revised up by $9.2 billion in 2023/24 and $34.5 billion over four years