Treasurer Jim Chalmers will project a surplus of $9.3bn in Tuesday night’s budget, the first back-to-back surplus since the global financial crisis in 2007-08.
The budget outcome for 2023-24 is a $10.5bn improvement from the mid-year economic update in December, but deficits over the next two years are projected to be worse.
After last year’s $22bn surplus, Chalmers said the result was “a powerful demonstration of Labor’s responsible economic management, which makes room for cost-of-living relief and investments in the future”.
“The forecasted surplus has come on top – not at the expense – of helping those doing it tough,” he said, in a sign of further cost-of-living measures expected to include extension of energy price relief.
In a caucus pep talk to Labor MPs on Monday afternoon the prime minister, Anthony Albanese, said Tuesday’s budget is “a Labor party budget through and through because it is a budget for every Australian, not just some”.
In what might be the last full-year budget before the next election, the Albanese government has had to balance avoiding adding upward pressure to inflation and providing cost-of-living relief to struggling households.
The projected $9.3bn surplus for 2023-24 is lower than several independent estimates, including by economist Chris Richardson, and the Commonwealth Bank, which puts the surplus at closer to $15bn.
The government says it is banking 96% of revenue improvements in 2023-24 while inflation remains above the Reserve Bank’s target band. The Treasury thinks inflation could be back below 3% by the end of the year, in part due to measures to be unveiled in Tuesday’s budget.
Given the mid-year update projected a $19bn deficit for 2024-25, confirmation that deficits will be larger in the next two years raises questions about whether the government is flipping the switch to a stimulatory budget too early, rather than continuing to fight inflation.
Labor is blaming a deterioration of deficits in 2024-25 and 2026-27 on what the finance minister, Katy Gallagher, has described as “unavoidable spending”.
This includes boosting funding to the home affairs department, continuing the Covid-19 response, preventing termination of health programs, and upgrading IT systems including for aged care and MyGov.
On Monday Albanese flagged that the budget will contain “new investments in Medicare and the health system” and “investment in the future” in the fields of jobs, skills, infrastructure, housing and social care.
In a statement, Chalmers said “the budget will ease cost-of-living pressures, not add to them, and incentivise investment in a Future Made in Australia”.
The budget will also contain a further response to the Universities Accord, in addition to student debt changes and practical placement payments.
The university sector is expecting international student visa application fees to be doubled from $710, raising $1.2bn to be spent on the accord response and visa processing. On Sunday Chalmers claimed that “people shouldn’t expect to see” substantial increases in visa fees in the budget.
Compared with the pre-election fiscal outlook, the 2023-24 budget will be $65.9bn better, with a cumulative improvement of more than $200bn over six years to 2027-28 according to Treasury figures released by Chalmer’s office.
Gallagher said “our budget discipline means we’ve found more than $77bn in savings and reprioritisations since coming to office, redirecting this spending towards the services that Australians rely upon”.
“We understand there’s still pressures on the budget, including spending on the NDIS, aged care, hospitals, Medicare and debt interest.”
“That’s why we’ve put a premium on responsible economic management that strikes the right balance between strengthening the budget and funding our priorities.”
Chalmers said: “Despite the substantial progress we’ve made, spending pressures continue to intensify and there’s more work to do to clean up the mess left behind by the Coalition.”
