For the first time in nearly 20 years a Federal Government has delivered a second consecutive Budget surplus. On Tuesday night Jim Chalmers was able to announce a surplus of $9.3 billion, riding the momentum of further revenue upgrades, cutting back on Government spending and returning most of the recent revenue windfalls back into the Budget.
This run of surpluses is expected to end based on the Government’s own forecasting and modelling due to committed expenditure on NDIS and various other programs. For the present moment, though, the key economic figures are:
- A surplus of $9.3 billion for 2023-24, but a deficit of $28.3 billion in 2024-25, followed by further deficits.
- Economic growth is expected to be 1.75% for 2023-24, 2% for 2024-25 and 2.25% the year after.
- Unemployment is expected to rise slightly to 4.5% next year.
- Inflation is expected to remain at 3.5% for 2023-24, but drop to 2.75% in 2024-25, returning to the Reserve Bank target range earlier than previously anticipated.
The Treasurer admitted that the biggest challenge and focus of this Budget was inflation. The Government remains very confident that this Budget will put downward pressure on inflation, not upward pressure. If inflation proves more stubborn than anticipated by Treasury, heading into an election year the Government could succeed or fail on the adage that at the end of the day, it’s what you do not what you say.
The list of winners and losers out of this Budget is lengthy and reflects the Treasurer’s comments that whilst focusing on inflation and the cost of living, this Budget was also intended as “equal part relief, restraint and reform”. Cost of living measures are short-term, broad based and targeted. Major investments extend to the Care Economy short term, infrastructure and housing ongoing, and a long-term economy shaping policy under the Future Made In Australia initiative.
As is customary, genuine tax reform is absent from discussion, but with the acknowledged structural deficits in place the Government should seek to explore alternative ways to raise revenue. In the short term, the Treasurer is relying on tax compliance and anti-avoidance initiatives to raise revenue, rather than any fundamental changes to revenue collection through changing the mix of taxes on consumption, resources, income and capital gains. Time will tell if they are bold enough to conquer, yet brave enough to fail in having a thorough discussion on tax reform.
For more information please read our articles on the Individual & Personal Taxation or Business Taxation updates within the May 2024 Federal Budget.
