The treasurer, Jim Chalmers, says people should not expect a surplus in this term of government despite a recent improvement in the budget bottom line, as he warns of deteriorating conditions in the global economy and intensifying spending pressures ahead.
On Wednesday, the government released the final budget outcome figures for 2021-22, which showed a $47.9bn improvement to the cash deficit for the year compared to the March budget, reducing from $79.8bn to $32bn.
The result was due to higher receipts totalling $27.7bn, and lower payments of $20.1bn.
Tax receipts were higher as a result of soaring commodity prices and a strong jobs market, while payments were down because of delays in Covid-19 related spending, reduced demand for some health services, and the impact of supply chain disruptions on infrastructure spending.
But despite the improvement to the deficit, Chalmers painted a bleak picture for the 25 October budget, saying the government would still be faced with difficult decisions as it dealt with growing pressures both domestically and internationally.
“The global economy is deteriorating and there are real fears for a number of other major economies and our major trading partners, and that will have a big impact on the budget,” Chalmers said.
“The context for the budget in October will be a deteriorating global economy, intensifying spending pressures and pressures on Australians, which can only be dealt with if we provide that cost of living relief in a way that also provides an economic dividend, and that is our strategy,” he said.
Pressed on the government’s plans for tax reform, Chalmers would not be drawn on anything beyond the government’s immediate plans for a crackdown on multinational tax evasion, saying there was no intention to tax the super profits of resources companies, and the government’s position on stage three tax cuts had not changed.
He said that there would be “difficult decisions” in the October budget, and downplayed expectations that the government would be able to deliver a surplus until at least the next term of government.
“I want to be upfront about that,” Chalmers said.
“The situation is more difficult than that, and I think Australians understand that given the fiscal and budget circumstances that we’ve inherited, it will take much more than one budget to turn that around.”
Chalmers said that the government was watching closely events unfolding in the UK and in the global economy more broadly as central banks put in place steep interest rate hikes to try to curb inflation.
“We are concerned, frankly, about developments in the United Kingdom. We make no judgement about the domestic politics of another country, but obviously, we pay close attention to what’s happening in comparable countries and the situation in the UK is concerning.”
“What we’re seeing around the world in other countries, as central banks in other comparable countries take even more drastic action, there are fears elsewhere about the impact of those interest rate rises on economies, like in the US, the UK and elsewhere, so obviously, we are monitoring that.
“We don’t pretend that rising interest rates don’t have the capacity to slow our own economy, but we’ve got a lot going for us in this country, too.”
“I am personally confident and upbeat and optimistic about the future of our country and the future of our economy, but we’ve got to tread this pretty perilous terrain in the interim.”
He also said he was aware of the cost pressures facing families, which would be exacerbated by the end to the cut to fuel excise, but said “there are other better ways to provide that cost of living relief”.
