Treasurer Jim Chalmers will unveil a $5.4 billion improvement in the federal budget this financial year, even as the deficit sinks to its worst level in five years.
With judicious use of words such as “sensible” and “restraint”, Dr Chalmers will tout the government’s responsible economic management as he reveals the mid-year budget update on Wednesday.
And there is more than just spin to back it up.
For the first time in eight years, he can honestly say the government’s decisions have improved the budget bottom line.
In what veteran budget watcher Chris Richardson dubs the “table of truth”, the figures will show the net impact of policy decisions shaved $2.2 billion off cumulative deficits over the four-year forward estimates.
Previous improvements to the bottom line have been entirely down to parameter variations – factors outside the government’s control – with government decisions worsening the budget outcome.
In last year’s mid-year update, the total impact of policy decisions over forward estimates amounted to a $17.5 billion deterioration in the bottom line.
In this year’s March budget, government decisions weakened the underlying cash balance by another $34.9 billion over four years.
But while parameter variations improved the bottom line of the March budget by more than $36 billion, the impact of good luck on the mid-year update was more limited.
Over the four-year forecast horizon, the underlying cash balance only improved by $8.4 billion, with $6.2 billion of that resulting from parameter variations.
Mr Richardson said the huge upward revisions to personal tax, company tax and the GST seen in previous years were a thing of the past, predicting only minor outperformance.
He urged extra restraint from the treasurer to bring down spending and help the Reserve Bank get inflation under control.
Dr Chalmers said the budget deficit for the current financial year, at $36.8 billion, was projected to be $5.4 billion better than the pre-election fiscal outlook and better in every year of the forward estimates “because we’ve managed the budget sensibly and responsibly”.
“It builds on the biggest improvement in the budget in a single parliamentary term and is a powerful demonstration of Labor’s responsible approach to the nation’s finances,” he said.
“By finding more savings, restraining spending and banking revenue, the budget is in much better nick than it was when we came to government, and it’s even improved since the last election.”
And all that despite a $35 billion increase to spending estimates Labor has had to accommodate in the budget, Dr Chalmers said.
Finance Minister Katy Gallagher said responsible financial management meant the government could ensure essential services, like veterans support, disaster recovery, and the aged pension, remained “robust and responsive to community needs”.