Dr Chalmers and Federal Member for Solomon, Luke Gosling visit a hospital in Darwin on Wednesday. Photo: Facebook.
Treasurer Dr Jim Chalmers said he anticipates the budget surplus for the 2022/23 financial year to exceed the $4.2 billion that was forecast in May’s federal budget, despite analysts predicting a 50:50 chance the economy will slip into recession.
Dr Chalmers used a speech to the Property Council of Australia in Darwin on 28 June to make the prediction, saying the surplus increase was a result of higher commodity prices and continuing employment growth.
“The surplus will be substantially bigger than the $4.2 billion that we printed in May,” he told media after the speech. “We deliberately took a very cautious, very conservative, very responsible, very restrained approach to the surplus that we printed in May, and we’ve banked almost all of the upward revisions to revenue.”
While he wouldn’t reveal how large he expects the surplus to be, Dr Chalmers did say $40 billion in savings and “reprioritisations” had been found, along with the government’s “spending restraining” in the budget.
“There are a lot of people doing it tough and we’ve got a responsibility to take the edge off a lot of these cost of living pressures where we can,” he said, without expanding on how the government is taking the edge off the cost of living.
“And what makes that possible, and responsible, and affordable, is the fact that we have made room in the budget by cracking down on the rorts and waste… so that we can invest and spend money where it is desperately needed which is cost of living help, investing in the future, at the same time as we get the budget on a much more sustainable footing.
“The other reason for that is that the global economy is an unpredictable place right now, and we want to make sure we can rebuild our buffers against this global uncertainty,” he added.
Unfortunately, Dr Chalmers also said he expects the economy’s growth to further slow to just 1.5 per cent in 2023/24, and that, while it was going in the right direction, inflation will continue to stay higher than “we’d like”.
“The 400-basis-point increase in rates since before the election last year is the most significant tightening cycle the RBA has undertaken since the inflation targeting era began,” he said.
“And this, along with global challenges, will significantly slow our economy,” he added. “With our expectations for growth going from 3.25 per cent this year, to 1.5 per cent in the next.”
Not long after Dr Chalmers’ speech, the Australian Bureau of Statistics announced that inflation fell from 6.9 per cent in April to 5.6 per cent in May. While it’s hardly a trend, the fall was attributed to lower fuel costs, which had risen sharply in April, as well as price drops in travel and accommodation.
Unfortunately, housing, food, furniture and household equipment prices, and insurance costs rose in the year to May, keeping the rate higher than Dr Chalmers and the Reserve Bank would like.
“Inflation is moderating in our economy but not as fast as we would like,” Dr Chalmers said at a media conference later in the day.
“It is good that inflation has been moderating since its peak around Christmas time, and we see that again in the new numbers released today. Inflation will be higher than we’d like for longer than we’d like and we understand that that is putting pressure on people right around this country.”
Analysts suggest the better-than-expected figure might reduce pressure on interest rates, with the Reserve Bank due to meet on 4 July to consider whether to continue to hike rates or to keep them on hold.
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