Workers will have to wait another year before their wages outstrip the rising cost of living, according to Treasury forecasts to be released next week.
Treasurer Jim Chalmers will hand down his second budget on Tuesday, in which Treasury will predict an earlier-than-expected end to falling real wages.
Real wage growth is when the growth in wages outpaces inflation, something most Australians haven't experienced in years.
The budget will show the lower-than-expected unemployment rate and soaring commodity prices have offered tens of billions in extra dollars to the federal government's bottom line.
Budget forecasts of wage growth have long failed to be realised.
In October, Treasury was forecasting real wage growth, where wage growth outstrips inflation, would not occur until mid-2024. It now expects it will occur early in 2024.
"While this is a step in the right direction, we know that many Australians are still under the pump from cost-of-living pressures and rising interest rates," Mr Chalmers said.
Despite all the extra money flowing into government coffers, the treasurer remains adamant the budget is a structural deficit in future years, when commodity prices are expected to fall back and unemployment rises.
Those longer-term forecasts have tempered the government's willingness to adopt raising the JobSeeker unemployment rate in line with calls from welfare groups.
Unemployment tipped to remain lower for longer
A lower unemployment rate offers a two-fold benefit to the budget, with the government paying less in welfare payments while also receiving more money from income tax.
Coal, iron ore and gas prices should bring with them a more than $30 billion benefit to the budget this year.
It leaves Labor facing the prospect of delivering the first budget surplus in 15 years.
"While low national unemployment is one of our best defences against the headwinds that are intensifying in the global economy right now, Australia will not be immune from these challenges," Mr Chalmers said.
"We know that the unemployment rate will rise again – our task in the budget is to create as many secure, well-paid jobs as we can in the meantime, to shield Australians from these pressures in the future."
Labor delivered an October budget after coming to power last May.
It forecasted unemployment would be 3.75 per cent in June this year. The budget on Tuesday will show that unemployment in June will be 3.5 per cent.
The October budget forecasted unemployment would have reached 4.5 per cent by June next year. Treasury now expects it will be 4.25 per cent by June 2024.
The Treasury is forecasting that peak unemployment is still expected to reach 4.5 per cent but not until the 2024-25 financial year, a year later than it was originally forecasted in October.
The government expects unemployment will remain below the 5.5 per cent average it had between the global financial crisis and the pandemic.
"The substantial improvement in the budget is not just about higher commodity prices, it’s also about lower unemployment and the beginning of wages growth," Mr Chalmers said.
Coalition says government must deliver a surplus
On Friday, the treasurer took aim at the Coalition, and the debt it had left behind.
Much of the nation's debt was added in response to the COVID-19 pandemic, during which Labor backed the bulk of the Coalition government's spending to support Australians.
Mr Chalmers said Tuesday's budget would show the cost of servicing the national debt would cost $60 million a day. He said the total bill was forecast to be $112 billion over the next four years.
Opposition Leader Peter Dutton on Friday said he expected the government would release a budget surplus on Tuesday.
He will deliver a budget-in-reply speech but has indicated the Coalition won't release its full suite of policies until closer to the next election.
Mr Dutton wouldn't be drawn on Labor's expected changes to the single-parent payment and JobSeeker, both of which are slated to see increases, until the budget is released.
