Higher tax earnings help slash Australian budget deficit

Higher personal and company tax income has driven a major improvement in Australia’s budget position, the government revealed.

Treasurer Jim Chalmers and Minister for Finance Katy Gallagher released the Mid-Year Economic and Fiscal Outlook (MYEFO), which is delivered annually in December to update Australians on the state of the government’s fiscal performance.

The document forecasts that the final federal budget deficit for the current 2023-24 financial year will be A$1.1 billion ($721.4 million) – down from the A$13.9 billion forecast in May. Between 2023-24 and 2026-27, budget deficits are now projected to total A$74.5 billion – an improvement of a cumulative A$39.5 billion relative to May’s projections.

“The Australian economy has shown resilience in the face of elevated inflation, higher interest rates and the volatile international environment, and is well positioned to grow more than all major advanced economies over the forecast period,” MYEFO documents said.

It attributed the improved budget forecasts to a cumulative A$50.4 billion increase in personal and company tax receipts through 2026-27. Despite the stronger budget position, Chalmers ruled out any further government cost-of-living support for Australians until he hands down the budget for 2024-25 in May.

Instead, he told reporters that the government’s decision to bank 92 per cent of upward revisions to revenue since May will help pay down debt and relieve inflationary pressure. Australia’s net debt is now expected to hit 21 per cent of the country’s gross domestic product (GDP) in mid-2027 – down from the 24 per cent forecast in May.