High Employment And Commodities Give Government Budget Windfall

Next Tuesday, October 25 the new Australian government will hand down its first budget. Treasurer Chalmers has been at pains to prepare households that there will only be moderate cost-of-living relief which will be focussed on election promises, such as childcare, medicine and education.

• The budget is likely to show an estimated A$150bn boost to revenues over the next four years compared to the previous government’s last budget in March. This is driven by strong export prices, weak AUD, multi-decade low unemployment, income-tax bracket creep and higher inflation boosting GST receipts. However, this windfall is likely to be only temporary. Last financial year, government revenues as a share of GDP hit a 16-year high and the Australian Financial Review (AFR) says that it could even be higher this year.
• Chalmers has also said that budget responsibility is the best way to prepare Australia for a slowdown in global economic growth, which would pullback commodity prices. He stated that he doesn’t want to make the RBA’s job even more difficult. Treasury has cut global growth forecasts by 1pp to 2.75% for 2023 compared to March.
• On the expenditure front, an $8.8bn blowout in the National Disability Scheme's budget over the next four years will be published in the federal budget. The interest bill on the debt is also expected to be A$900bn higher, according to the AFR. To reduce costs, the Treasurer is looking to cut around A$10bn in grants to Australia’s regions, including for infrastructure (The Australian).