Budget cracks widen as Chalmers banks second surplus

Jim Chalmers will rely on NDIS and aged-care reforms to rein in budget spending and offset falling tax revenue and lower commodity prices, as Labor banked a second surplus of $15.8bn.

Jim Chalmers on Monday releases the final budget outcome revealing a $15.8bn surplus in 2023-24, which is $6.4bn higher than predicted in the May budget. Picture: Tertius Pickard/NewsWire

Jim Chalmers will rely on new NDIS and aged-care reforms to rein in budget spending and offset falling tax revenue and lower commodity prices, as the Albanese government banked a second surplus of $15.8bn in its final budget outcome.

Ahead of revealing the 2023-24 surplus was $6.4bn higher than forecast in the May budget, the Treasurer said “our bigger than expected surplus in the year just gone is entirely due to lower spending, with the tax take also lower”.

While the Albanese government has landed consecutive surpluses for the first time in almost two decades, assisted by a post-pandemic boom and high migration levels, The Australian understands there are concerns about widening cracks in the budget that will heap pressure on future surpluses.

Amid flatlining economic growth and productivity, and as households and businesses struggle with sticky inflation and elevated interest rates, growing structural spending pressures are threatening to return the budget to deficit over the long-term.

Senior Labor sources said the mid-year economic and fiscal outlook released by Dr Chalmers and Finance Minister Katy Gallagher in December looms as a key pre-election document if Anthony Albanese decides against a March budget and calls an election.

Spending on Labor election promises is expected to be included in the mid-year budget update to give the Prime Minister scope for an earlier election.

Seeking to capitalise on June 5 comments by Reserve Bank governor Michele Bullock, who said “I think fiscal policy has been running a surplus for the last couple of years, so I’d say that has been helping”, Dr Chalmers said “a second straight surplus is proof of our responsible economic management”.

“These surpluses help pay down Liberal debt, help fight inflation and haven’t come at the expense of cost-of-living relief for people under pressure,” he said.

Opposition Treasury spokesman Angus Taylor said the combination of falling commodity prices, rising debt, a worsening structural budget balance and the booking of budget “zombie measures” meant Labor could not sustain a budget surplus.

Dr Chalmers said the 2023-24 surplus, which follows a $22.1bn surplus the year before, was delivered through lower spending because revenue was down on budget forecasts.

Labor’s budget savings of $77.4bn, including $12.2bn in the last financial year, does not break down how much was reprioritised in spending elsewhere.

Senator Gallagher said “by exercising fiscal discipline and reducing wasteful Liberal spending, we’re able to invest in the things that matter most to Australian families”.

“Posting back-to-back surpluses is a key part of our plan to take pressure off inflation while providing relief to families, who we know are under pressure. It’s a direct contrast with our opponents, whose fiscal mismanagement left Australians with a trillion dollars of debt with not enough to show for it.”

Mr Taylor and opposition finance spokeswoman Jane Hume on Monday will launch a push for the government to abandon its tax on superannuation savings in the mid-year budget update. The Coalition believes the unlegislated superannuation tax changes are propping up the budget by $5.5bn over the forward estimates and $21.6bn over the medium-term.

Senator Hume and Mr Taylor will also attack the government on debt, claiming that gross debt levels have grown by almost $50bn since the 2022 election.

Mr Taylor told The Australian that “Labor’s changes to super are an unindexed, undemocratic wealth tax”.

“There is no pathway to pass this bill, yet it is propping up a budget where Labor’s decisions are costing $4 for every $1 of revenue,” Mr Taylor said.

“Under Labor’s plan, two million Australians under 25 will see taxes double on their retirement savings.”

Senator Hume said the government had failed to address structural pressures and was hiding “behind zombie measures to prevent Australians knowing the full extent of their mismanagement”.

“Their plan to tax unrealised gains in Australians’ superannuation – an unprecedented tax in

Australia – was already outrageous. Now they are using it to hide the true state of the budget,” Senator Hume said.

“Labor promised to take this to an election, but they have already booked it in the budget. They’ve shown they have no discipline. But now they’ve confirmed they won’t be honest with Australians as well.”