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Chalmers to unveil big surplus surprise

PRIME MINISTER LABOUR CAUCUS
Treasurer Jim Chalmers will hand down his third federal budget on Tuesday. Picture: NCA NewsWire / Martin Ollman

Treasurer Jim Chalmers will deliver back-to-back budgets in the black, with fresh forecasts of the nation’s finances set to show a surplus of $9.3bn for the current fiscal year.

But even with the significant turnaround since the mid-year budget update (MYEFO) forecast a wafer-thin deficit of $1.1bn just six months ago, the budget will slip back into the red from next financial year as surging spending and rising unemployment hammer the bottom line.

Heralding the result, Dr Chalmers said the projected surplus had not come at the expense of expected cost of living relief.

“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 added.

PRIME MINISTER LABOUR CAUCUS
Treasurer Jim Chalmers will announce a larger than expected surplus. Picture: NCA NewsWire / Martin Ollman

“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 behind by the Coalition.”

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While the forecasted deficits for the next three financial years are not yet known, they are expected to be in excess of the combined deficits of $73.3bn forecast in MYEFO.

Indeed, the soaring cost growth of the NDIS, the interest bill on government debt, health and aged care spending, and record defence spending will place increased strain on the budget bottom line in the near term.

The budget position, however, will be stronger in 2027-28 when compared to the December forecasts which showed the budget still remained in the red.

“We’ve put a premium on responsible economic management that strikes the right balance between strengthening the budget and funding our priorities,” Finance Minister Katy Gallagher said.

ALBANESE PIX FAC
The Albanese government says its budget will address cost of living pressures without adding to inflation. Picture: NCA NewsWire / Martin Ollman

Buoyed by soaring revenue windfalls due to Australia’s red hot labour market, still elevated commodity profits and strong corporate tax receipts, Treasury coffers have swelled since Labor came to office.

The lion’s share of receipts this financial year will go towards reducing the budget bottom line, with 96 per cent of revenue upgrades set to be banked. The remaining funds will cover increases in government payments.

To help rising spending demands, Labor has already announced it will repurpose $23.1bn of previously allocated funds, and will save $1bn from reducing the government’s reliance on consultants.

An additional, $3.8bn in savings and reprioritisations will be revealed on budget night.

Despite the upgrades to the budget bottom line this budget, gross debt is still expected to head north of $1 trillion over the four year forward estimates period, a threshold which Dr Chalmers regularly criticised the then-Morrison government for during his time in Opposition.