It was a plan “for the here and now, and the decades to come,” federal Treasurer Jim Chalmers promised in his opening remarks in the government’s official Budget speech (or, as it’s officially known, the Appropriation Bill No. 1).
But while Australians’ spirits may receive a positive bump in the immediate future thanks to a range of payments set to occur on July 1 this year, the next decade—or at least as far forward as the Budget forecasts go—provide little cause for celebration.
Mr. Chalmers boasted twice of having achieved “the first surplus in 15 years last year” and “the first back-to-back surplus in decades,” from the next financial year onwards, the country’s accounts go well into the red and remain there for at least the next four years.
This year, the government has spent $22.1 billion (US$14.61 billion) less than it brings in. But in 2024/25, a deficit of $28.3 billion is expected, more than wiping out that achievement.
And from then on, things only get worse.
A deficit of $42.8 billion (1.5 percent of GDP) is predicted in 2025/26, before declining to $26.7 billion the following year, and $24.3 billion in 2027/28. In all, the government will spend $215 billion more than it earns across the five years.
Yet these will rise to an eye-watering $1.007 trillion (that’s $1,007,000,000,000) or 35.1 percent of GDP by next year, and it will keep on rising—to $1.06 trillion in 2026/27, and then $1.11 trillion in 2027/28.
Another $17 Billion of Extra Spending in the Last Six Months
The treasurer claimed there was “a stronger fiscal outcome every year compared to when we came to government ... $215 billion stronger over the six years to 2027.”Despite spruiking the Labor government’s economic management, Treasury estimates on federal government spending increased from six months ago, from $710 billion to $727 billion.
Of the $17 billion increase, $12 billion is due to new decisions announced on Budget night.
Those included up to $3 billion for cheaper medicines, plus a freeze on the maximum cost of prescriptions, so no one will pay more than $31.00 an item for the next two years (pensioners and concession card holders will have prices frozen for five years, meaning they'll pay no more than $7.70 an item).
Homeowners will get an energy rebate of $300 each, with a slightly higher payment for small businesses, for a total cost of $3.5 billion.
Of course, there are also the tax cuts, already signalled well ahead of the Budget. From July 1, all 13.6 million taxpayers will keep an additional $1,888 of what they earn each year, which is $36 a week.
Increased Tax Enforcement
But while giving with one hand, the government also intends to take back—at least from some people—with the other.“Measures to strengthen the fairness and sustainability of the tax system” are expected to net $3.1 billion over five years.
These will include additional funding for the Australian Taxation Office to “address fraud, extending tax compliance activities focused on domestic and multinational tax avoidance, the shadow economy and the personal income tax system, and strengthening the foreign resident capital gains tax regime.”
The government claims $15.4 billion of its additional spending is “unavoidable ... to prevent any cuts to the services that Australians rely on” such as funding Services Australia to “help stabilise claim processing performance and continue emergency response capability, continue to operate, maintain and enhance MyGov, and improve safety for staff and customers.”
It also needs to cater for “unavoidable cost pressures for existing projects in the Infrastructure Investment Program” and “extend terminating health programs and to continue the COVID-19 response.”
