Australia’s Finance Minister Jim Chalmers has warned that despite the recently announced $50 billion (US$32.3 billion) improvement in government earnings, the budget is unlikely to be in the black over the next few years.
In the final result of the budget paper For the 2021-2022 fiscal year, the federal government posted an underlying deficit of $32 billion.
The deficit was well below our initial forecast of $79.8 billion. At the time, the government was expected to face a further deterioration in its financial position due to COVID-19 aid spending.
Federal budget still under pressure
Treasurers welcomed the turnaround in budget earnings, but said the favorable situation would come to an end.
“Australia will continue to be impacted by the continued impact on its financial position, including rising costs of servicing government debt, higher government spending due to higher indices, and potential spending increases in areas such as NDIS, health, aged care and defense. “We are facing greater pressure to provide
Finance Minister Katie Gallagher added that the government will also have to address spending delays from last year.
Under these circumstances, the Treasury Secretary said his department is unlikely to include a surplus projection in its Oct. 25 budget for fiscal year 2022-2023.
“In October, we recommend not anticipating a budget surplus.” He said.
“I think Australians understand that the situation is more difficult than that and given the financial and budgetary situation we have inherited, it will take multiple budgets to turn it around. .”
AMP economist Shane Oliver agrees the budget will take time to recover, citing a potential drop in commodity prices and rising unemployment as the economy slows, in part. I got
He added that while the government would need to spend more in many areas, a significant improvement in revenues was unlikely given the expected slowdown in long-term productivity growth.
“So while the October budget may be a little lower than what was projected in March, it is likely to project continued deficits for years to come,” Oliver said.
Summary of budget results for 2021-2022
The newly reported deficit of $32 billion follows a shortfall of $134.2 billion in 2020-21 and a deficit of $85.3 billion in 2019-2020.
Additionally, the 2021-2022 budget increased revenue by $27.7 billion due to higher commodity prices and higher income taxes. Also, government spending fell short of projections by $20.1 billion.
“This is due to the slowdown in COVID spending, temporarily lower than expected demand for some health and NDIS services, and supply chain disruptions and capacity constraints for road and rail infrastructure projects and other spending. It was due to impact,” the budget results paper said.
The paper also showed that government payments for COVID-19 business support were lower than expected.
Shadow Treasurer’s Angus Taylor, meanwhile, said the budget shift was sufficiently diversified that it wasn’t solely due to rising commodity prices.
He said the Labor government was downplaying the $48 billion debt reduction, while pointing to factors such as high employment and healthy business performance.
“Labor has inherited a very strong position,” Taylor told reporters.
“Perhaps he [Chalmers] They’re just harassing the Australian people for higher taxes. Because of the big spending budget, he needs to tax people more. ”
Taylor then warned that increased government spending would exacerbate inflation.
Chalmers, meanwhile, said the October budget would include limited cost-of-living measures that would not spur inflation.
“(The government) is providing responsible cost-of-living relief in a way that yields economic dividends and does not force the Reserve Bank’s hand any further,” he told parliament.