Australia’s federal budget is projected to record a $4bn surplus this financial year, which would be the first surplus in 15 years.
The treasurer, Jim Chalmers, has revealed ahead of Tuesday night’s budget that the 2022-23 bottom line has reached surplus, despite the projected $78bn deficit in the Coalition’s March 2022 budget.
The four-year budget projection is now $143bn better off than when the treasury carried out the same projection a year ago for the last Coalition government budget. However, experts warn that, without further reform, the budget is likely to remain in structural deficit, meaning in more normal conditions revenue is still expected to fall short of spending in the medium term.
Chalmers has been preparing the ground for the surprise return to surplus by noting significant improvement in revenue from higher commodity prices, lower unemployment and sooner than expected real wage growth.
With almost two months still to go in the 2022-23 financial year and $4bn amounting to just 0.6% of the budget’s revenue, the Albanese government has vowed to take a cautious approach, with no Back in Black mugs on budget night.
Governments have been burnt before predicting surpluses that did not eventuate, including Liberal treasurer Josh Frydenberg’s projected surplus in the 2019 budget which became a record deficit after Covid-19 hit, and Labor treasurer Wayne Swan’s claim to be delivering four surpluses in the 2012 budget.
Earlier in May senior economist Chris Richardson said that a surplus was “possible but not guaranteed” although April revenue figures, which are not yet public, are expected to show the month was a “humdinger”.
After the surge in revenue in April, Guardian Australia understands the government committed an extra $20bn in its final expenditure review committee meetings late in the week.
The Albanese government’s first full-year budget will hold on to 82% of revenue upgrades, as the high-inflation environment discourages excessive spending to prevent fiscal policy counteracting contractionary monetary policy, after 11 interest rate rises.
Over the October and May budgets, 87% of revenue upgrades have been returned to the bottom line – up from an average of 40% under the Morrison government and 30% under the Howard government.
The Albanese government has saved and redirected $40bn in its first two budgets, including $17.8bn in Tuesday’s budget.
In a statement Chalmers said that “the improvements you’ll see in the budget are a direct and deliberate result of the Albanese government’s approach to substantial near-term boosts to revenue”.
“Our responsible economic management is all about spending restraint, substantial savings redirected to other priorities, and modest but meaningful tax changes.”
The Albanese government has raised revenue with a $2.4bn redesign of the petroleum resource rent tax (PRRT), tightening of tax concessions on superannuation balances of more than $3m, a rise in tobacco excise and the introduction of a tax floor for multinationals.
On Sunday the shadow treasurer, Angus Taylor, claimed that “a drover’s dog can deliver a budget surplus this year”.
“We saw a budget surplus from the moment the Victorian and New South Wales economies were opened up in 2021 through to the election, the budget was in surplus,” he told Sky News. “So the government’s inherited this situation and they can deliver that in the short term.”
Chalmers said the budget outcome “would never have been possible without our decision to return most of the upward revisions to revenue to the bottom line”.
“Debt and deficits would be bigger and the inflation challenge even more serious if we’d followed the path taken by our predecessors.”
Chalmers said despite the Albanese government’s “responsible economic management … it will take more than one budget or one term to clean up the mess we inherited”.
“We are putting the budget on a much more sustainable footing at the same time as we provide cost-of-living relief and invest in the future.”
The budget contains $14.6bn of cost-of-living relief including restoring single parent payments until children turn 14, energy relief for households and small businesses, investments in energy efficiency and cheaper medicines.
Details of an increase in jobseeker unemployment payments and a possible increase to rent assistance will be unveiled on Tuesday night.
Labor has come under fire from the Greens and the crossbench for not raising enough from PRRT changes and for a mooted jobseeker increase of up to $40 a fortnight, less than the Morrison government raised it in February 2021.
On Monday the prime minister, Anthony Albanese, told Labor caucus he was “genuinely very proud of the budget which of course won’t do everything people want us to do”.
“It is in the best Labor traditions: it will help people and it will be responsible.
“Inflation is a tax on the poor – which is why it’s a Labor principle to be fiscally responsible.”
