Jim Chalmers’ second surplus virtually locked in
Documents reveal a dramatic deficit reduction on the back of a revenue surge and lower spending ahead of the May 14 budget.
Jim Chalmers’ second surplus is virtually guaranteed after monthly financial statements revealed a dramatic deficit reduction on the back of a $391m surge in receipts and lower spending than projected by Treasury.
Finance documents released on Thursday revealed a fast-improving position ahead of the May 14 budget, with the 2023-24 underlying cash balance to the end of February showing a $6.1bn deficit and the fiscal balance increasing to a $2.4bn surplus.
Total receipts lifted $391m higher than the mid-year budget profile and payments were $500m lower. Last month’s snapshot to the end of January showed a $22.4bn underlying cash balance deficit and $13.9bn fiscal balance deficit.
After consistently flagging the government is within striking distance of a consecutive surplus, Dr Chalmers said “we know a surplus is not an end in itself but an important way to take pressure off inflation and build a better foundation to fund the nation’s most pressing priorities”.
“While we’re not there yet, a second surplus is within reach. Delivering a second surplus is the right strategy given the ongoing inflation challenge in our economy and the intensifying spending pressures on the budget,” the Treasurer said.
“Despite the substantial progress we’ve made, we know it will take more than a single budget or a single term to clean up the mess left behind by the former government. Like our first two budgets, the May 14 budget will continue to put a premium on what’s responsible, affordable, and methodical.”
As revealed in The Australian on Thursday, Anthony Albanese confirmed that “a future made in Australia” would be a key centrepiece of his government’s third budget.
The Prime Minister, who travelled to the former Liddell coal-fired power station site in the NSW Hunter Region to announce a $1bn investment in solar panel manufacturing, flagged more money backing Labor’s clean energy focus would be “rolling out” over the next year.
With monthly financial statements showing a net operating balance surplus of $4.6bn at the end of February, Finance Minister Katy Gallagher said a “budget surplus is in sight”.
Senator Gallagher, who has led the government’s “rorts and waste” audit, said “while we’re not there yet, having a second budget surplus would mean we could continue to manage one of the biggest spending pressures on the budget, which is interest on debt”.
“Achieving a budget surplus is not just for the sake of having a surplus – it allows us to address the challenges in the economy and puts the budget on a more solid footing,” Senator Gallagher said.
“We know that a lot of Australians are doing it tough and that’s why we’re continuing to be responsible economic managers that are focused on fighting inflation and addressing cost of living pressures to support Australians who need it.”
The finance documents show that net debt at the end of last month fell to $520.5bn compared with $541.1bn at the end of January.
While monthly updates are considered “generally volatile due to timing differences between revenue and receipts, and expenses and payments”, the Albanese government is confident it will bank a second surplus after last year securing the nation’s first in 15 years.
Ahead of his third budget and last scheduled budget before the 2025 election, Dr Chalmers has enjoyed a series of positive inflation and labour force data amid rising optimism of interest rate cuts later this year.
Australian Bureau of Statistics data last week showed unemployment dropping from 4.1 to 3.7 per cent and monthly inflation figures this week revealed a lower than expected 3.4 per cent consumer price index rise in the 12-months to February.
The May budget is expected to include new cost-of-living measures and clean energy incentives. Writing in The Australian this month, Dr Chalmers said “we have already announced more than the usual amount of (budget) initiatives ahead of time”.
“This includes: a big increase in defence spending responding to the Defence Strategic Review; paying the super guarantee on paid parental leave; and substantial investments in remote housing as part of Closing The Gap,” Dr Chalmers wrote.
“Most substantial of all, our cost-of-living tax cuts were announced in January to give us time to legislate them and bed them down as soon as we could.”
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