Hopes for cost of living boost dashed

Figures printed in the May budget forecast a surplus of $4.2bn for the 2022-2033 financial year, but the Treasurer confirmed on Monday he now expects that number to be upwards of $20bn.

The improvement is a result of strong commodity prices and higher than expected tax revenue due to a tight jobs market.

“We will do the work and the checking over the course of the next few weeks and we will release the final budget outcome in the usual way,” he told reporters at Parliament House in Canberra.

“The current expectation of the officials is that the surplus for 22-23 will be around $20 billion or more, likely just north of that figure.”

But as millions of Australians are struggling with cost of living pressures, and historically high inflation trending down, the Treasurer was asked whether that allowed scope for a cash splash in the near-term.

He said the government wanted to bank the improvements now to provide a buffer come next financial year when the budget surplus is forecast to dip back into the red.

“We’re not currently working on a new package of cost of living relief. We’re focused on rolling out billions of dollars in cost of living relief we have already announced,” Dr Chalmers said.

“What a much better budget position allows for, is it gives you the flexibility down the track, in future budgets.

“We’re now in the subsequent budget year and so we’re not looking for ways to spend out of last year’s budget. Even if we wanted to, that wouldn’t be a goer.”

An analysis by the Parliamentary Budget Office, released last month, confirmed the improved outlook would result in a surplus for 2022-23 before returning to a deficit through the next four years.

Interest payments on government debt remain one of the fastest-growing pressures on the budget, with the PBO forecasting it will reach its highest level since 1999-2000 over the next decade.

Of the seven fastest-growing major payments in the 2023-24 budget, all except for defence and interest payments directly relate to health and ageing.

The June quarter consumer price index figures are set to be released on Wednesday. Dr Chalmers said he expects it to show inflation was moderating.

“We would like to see it moderate quicker. It will be higher than we’d like for longer than we’d like but it has come off that peak in inflation that we saw around Christmas time, and certainly less than the expectation is for less than what we saw at the beginning of 2022,” he said.

“The global economic challenges are substantial, and we expect the slowdown in our economy to be significant. But our forecasts have the Australian economy continuing to grow that hasn’t changed.”

Meanwhile, the cabinet signed off on the appointment of former treasurer Wayne Swan’s chief of staff, Chris Barrett, as the next head of the Productivity Commission.

Mr Barrett has been deputy secretary for Victoria’s Treasury and Finance Department since January 2021 and has been tasked with a shake up of the institution.

“We’ve made it clear we think the productivity opportunity for Australia is not to make people work longer for less but to invest in human capital and the energy transformation and get much better at adapting and adopting technology as it evolves,” Dr Chalmers said.

Originally published as Treasurer Jim Chalmers shoots down call to spend $20bn budget boost on cost of living relief