Budget surplus increases: Treasurer Jim Chalmers unveils surprise cash boost to government’s bottom line
- The government budget showed a surplus of $4.2 billion in May
- The figure has since risen to $22.1 billion
- First recorded surplus since Peter Costello’s final budget in 2007
Treasurer Jim Chalmers is expected to unveil an improvement in budget outcomes of almost $18 billion, taking the underlying cash surplus to $22.1 billion.
On Friday, the government will formally release the final budget results for 2022-2023, which will show the first recorded surplus since Peter Costello’s final 2007 budget.
In May, the budget had projected a smaller surplus of $4.2 billion.
The result follows a boom in commodity prices and rising tax revenues, which pushed revenues higher than previously forecast. At the same time, payments are expected to be lower than expected as unemployment is near record lows.
Speaking ahead of the release of the final budget results on Friday, Dr Chalmers said the results are a testament to the government’s responsible economic management and restrained spending.
The federal treasurer (pictured with wife Laura) will unveil a major improvement in the government’s budget results on Friday
“Our responsible fiscal management has not only delivered the first surplus in 15 years, it has also taken pressure off inflation, interest rates and the cost of living,” he said.
But Dr. Chalmers said the budget still faces long-term challenges and implementing structural cuts would take several election cycles.
“Despite the surplus for 2022-2023, structural pressures on the budget are increasing rather than decreasing and will take more than a year or one parliamentary term to address.”
The Sixth Intergenerational Report, published in August, found that the federal budget would return to deficit starting in 2024 and remain there for the next 40 years.
Although Chalmers did not specifically mention the impact of commodity prices on the budget outcome, their contribution to the public purse is expected to be substantial.
In the May budget, finance ministry officials were forced to revise upward their commodity price forecasts.
The federal government will announce a budget surplus of $22.1 billion, an increase of almost $18 billion since the May budget
The Treasury Department also forecasts that it will take four quarters, instead of the two initially expected, for iron ore and coal prices to fall to their long-term averages.
“Prices have also been modestly increased to take into account recent developments in commodity markets, mining inflation and updated assessments of long-term fundamental supply and demand data,” the budget documents said.
“Commodity price assumptions remain conservative and at the lower end of market forecasts.”
At the time, the overhaul added $22 billion to the budget.
Despite revised assumptions that the iron ore price would fall to US$60 per tonne by the end of March next year, it has since risen to US$121.80 per tonne.
Rising commodity prices have helped replenish government coffers (stock image)
Coal prices also continue to defy budget assumptions and have risen 20 percent since June.
Both federal and state finance have a reputation for underestimating commodity prices during boom periods, allowing governments to profit from any price increase.
In an interview on 5AA on Friday, Prime Minister Anthony Albanese downplayed the contribution of commodity prices
“That is only a small part of what has been achieved,” Mr Albanese said.
“It’s important, but it’s not the only factor.”
Deficits are forecast for the next 40 years, despite Australia posting a surplus in the 2022-2023 financial year. The photo shows Jim Chalmers during question time