Budget: Possible Near-Term Surplus But Deficits Thereafter

At 1930 AEST on Tuesday, the Federal Government delivers the 2023-24 budget. If it turns out to be significantly expansionary then RBA rate expectations may be affected. Analysts expect the FY23 forecasts to show a small deficit of around 0.25% of GDP but there is some speculation that it could be a small surplus, the first in 15 years.

• The budget recorded a $1bn surplus in the financial year to March due to strong commodity prices, low unemployment and higher inflation but the structural position was a deficit of $11.2bn. Treasurer Chalmers has said that a surplus is not a priority in this term and deficits are expected over the rest of the forecast horizon due to aged care, NDIS, health and defence commitments, and interest payments.
• Revenue/savings measures announced so far cover just over half of the announced additional spending. Commodity price forecasts have been lifted.
• A $14.6bn cost-of-living relief package is to be included covering up to $500 energy bill relief for 5.5mn households and 1mn small businesses. It will also include cheaper medicines and other assistance. Treasurer Chalmers has said that the measures won’t “add to inflation”.
• There is going to be an extension to the single parent payment covering children between the ages of 8 and 14 costing $1.9bn. Also an extra increase above indexation to JobSeeker for the over 55s is likely.
• Changes to the indexation of funding for community services covering domestic violence, homelessness, disability and mental health will cost an additional $4bn.
• The 15% increase to aged-care wages will cost $11.3bn and increased childcare and parental leave will cost $9bn. There will also be further investment in green energy.
• The government has found extra savings of $17.8bn on top of the $22bn in October. The 5%/year increase in tobacco tax will raise $3.3bn over 4 years and the reduction in super concessions will be worth $0.3bn.
• There will be a 90% cap on deductions firms in the petroleum & gas sector can make to reduce their petroleum resource rent tax liability introduced on July 1. This will raise $2.4bn. 8 of the 11 recommendations made by the Treasury’s Gas Transfer Pricing Review will be implemented.
  - The Australian