Third-largest budget surplus soon to turn into a sea of red ink
By Shane Wright
The federal government is sitting on the third-largest budget surplus in history, but it is expected to shrink through the final month of the financial year before plunging back into the red.
Finance Department figures released on Friday showed the budget running a surplus of $18.3 billion for the 2023-24 financial year to the end of May. Only the full-year surpluses of 2022-23 ($22.1 billion) and 2007-08 ($19.8 billion) were larger.
Treasurer Jim Chalmers ahead of releasing the 2023-24 budget. It will end up showing a surplus of about $10 billion before the nation’s finances sink back into the red.Credit: Alex Ellinghausen
But the surplus for the first 11 months of the year is expected to fall back through June to end up closer to the $9.3 billion forecast by Treasurer Jim Chalmers last month.
The figures suggest extra spending across several key areas has to flow across the economy this month.
Just 61 per cent of the $14.9 billion expected to be spent on transport and communications programs had been spent by the end of last month, while only 67 per cent of the $4.1 billion earmarked for agriculture, forestry and fishing had been spent.
The single largest budget expenditure is across social security and welfare at $252 billion. More than 91 per cent of this has been spent, suggesting it is on track to meet its 2023-24 forecast.
Revenue has remained strong, but there are signs the soft economy is starting to hit key sources of taxation.
Total personal income tax collections, which account for almost half of government revenue, were $2.2 billion behind expectations at the end of May. GST and other consumption taxes are now $500 million behind forecasts.
However, company tax is $2.6 billion ahead of expectations, while superannuation taxes are now almost $600 million stronger than expected.
Despite these improvements, the government is expecting June tax revenues to be weaker than forecast. This, on top of the rise in late-year spending, is tipped to cut the 2023-24 surplus to about $10 billion.
When then-treasurer Josh Frydenberg first forecast the 2023-24 budget, he predicted a deficit of $66.9 billion.
Finance Minister Katy Gallagher said the government was helping put downward pressure on inflation.
“Delivering this second consecutive surplus is a key part of those efforts and ensures fiscal and monetary policy are aligned in bringing inflation down,” she said.
“After inheriting a trillion dollars of debt, the Albanese Labor government has turned the budget bottom line around by finding savings, reprioritising spending and slashing the former Coalition government’s waste.”
Separate figures from the Australian Office of Financial Management showed total government debt ended the financial year at $906.9 billion, compared with original expectations of more than $1.1 trillion.
While the budget is now in the black, Chalmers has forecast a deficit of $28.3 billion in 2024-25, which starts on Monday, and a $42.8 billion deficit the following year.
The stage 3 tax cuts starting next week are expected to cost $23 billion in the coming year and about $25 billion the year after.
Chalmers said measures such as tax cuts, energy bill relief and cheaper medicines would help Australians deal with inflationary pressures.
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