Budget 2024: Australia Reports 2nd Surplus on the Back of Strong Commodity Prices

The 2024-2025 Budget Papers are seen at a printing facility in Canberra, Australia, on May 12, 2024. AAP Image/Mick Tsikas

Australia’s federal budget will report a $9.3 billion (US$6.14 billion) surplus for the 2023-24 financial year on the back of strong commodity prices.

While the figure is well below the $22.1 billion surplus in 2022-23, it marks the first back-to-back surplus in nearly two decades.

The last time Australia posted two consecutive surpluses was in the 2007-08 financial year, just before the Global Financial Crisis swept through the world economy.

The $9.3 billion surplus will also indicate a bottom-line improvement of around $10.5 billion on forecasts from the mid-year economic and fiscal outlook released in December 2023, which predicted a deficit of $1.1 billion.

In addition, the budget papers show an improvement of over $200 billion in the budget over the six years to 2027-28 compared to what was forecast before the last federal election.

It is worth noting that the second surplus is driven by the revenue from strong employment and high commodity prices.

Treasurer Jim Chalmers said the surplus would allow the government to implement significant cost-of-living measures amid stubborn inflation and stagnant economic growth.

“Another surplus is a powerful demonstration of Labor’s responsible economic management, which makes room for cost-of-living relief and investments in the future,” he said.

“The forecasted surplus has come on top, not at the expense, of those doing it tough.

“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 by the coalition.”

As Mr. Chalmers touted the financial achievement of his government, Shadow Treasurer Angus Taylor warned the surplus would not be long term.

“What we need to see is a structural surplus, not a windfall surplus. We, of course, have got very high commodity prices. We’ve seen a big increase in personal income taxes being paid,” he told ABC Radio.

“So rivers of revenues that are unsustainable. But what we need to beat inflation is a structural surplus.”

Cost of Living Measures for Australians

At the core of the government’s cost of living measures in the budget is an estimated $107 billion worth of tax savings for Australians due to the revised stage-three tax cuts to take effect in July 2024.

The government estimated that the tax cuts would result in $36 in savings per week for each Australian.

Mr. Chalmers also indicated that the government will provide other relief measures.

“There’ll be a tax cut for every taxpayer, but there’ll be additional cost of living help on top of that as well,” he told Sky News.

“At the same time as we try and build much more housing, because that’s one of the reasons why people are under so much pressure, that absence of housing.”

Treasurer Jim Chalmers arrives at Parliament House in Canberra, Australia, on May 14, 2024. Tracey Nearmy/Getty Images

Nevertheless, the treasurer has been tight-lipped about what specific measures will be introduced in the budget.

Amid an improvement in the budget bottom line, the Treasury forecasted that inflation would drop to 2.75 percent by December 2024.

This is a year earlier than the timeframe the Reserve Bank of Australia forecast, predicting inflation to fall within its target band of 2-3 percent.

However, Mr. Taylor was sceptical about the government’s ability to curb inflation.

“It (inflation) is still well above target. They promised that they were going to beat it. There’s no sign of that yet. It’s nowhere near the target range,” he said.

“The Reserve Bank just in the last week or so has set off the warning bells telling us that this is a very serious problem right now. It is not beaten. And yet the Treasury is saying everybody’s overreacting.”