The Coalition government says the 2018 financial year budget deficit shrank to $10.1 billion, almost half the $18.2 billion forecast in the May budget, and one third the original forecast.
Despite the surge, the government is playing down, but not ruling out, an early return to surplus as it uses extra revenue to fund new spending commitments rather than find savings elsewhere.
The final budget outcome for 2017-18 was driven by a revenue surge largely due to high company tax receipts, as well as higher income taxes and lower welfare payments due to growing employment.
Welfare dependency for working age people is its lowest level in 25 years. In 2017-18, there were 90,000 fewer working age Australians on welfare.
Treasurer Josh Frydenberg and Finance Minister Mathias Cormann used the numbers to warn voters against a return to Labor, saying that would jeopardise the comeback.
The deficit of $10.1 billion for the year ended June 30 represents a $23 billion turnaround from the $33.2 billion gap the year before, 2016-17. It is also a $19.3 billion improvement on the $29.4 billion deficit estimated outlined in the 2017-18 Budget
The May budget forecast a deficit of $14.5 billion for this financial year and a balance of $2.2 billion for the financial year 2020. The revenue surge has prompted considerable expectation the government will go to the next election promising an early surplus.
Mr Frydenberg left open the prospect of an early return to surplus but said that would not be known until the Mid Year Economic and Fiscal Outlook (MYEFO) was released before Christmas.
“We are still on track to come back to balance in 2019/20. That is the most recent forecasts, and as you know, the next forecasts will be updated in MYEFO,” he said.
At the same time, the government has abandoned its rule of funding all new spending using offsets elsewhere. Instead, it is using the extra revenue to pay for promises which, since the budget, amount to about $4 billion over the four-year forward estimates.
Labor says the government has abandoned responsible budget management.
Mr Frydenberg said in the past financial year, receipts “were $13.4 billion higher than expected, reflecting the record number of people in jobs and our growing economy”.
Spending was $6.9 billion lower than estimated at the time of the 2017-18 Budget. This includes NDIS payments which were $2.3 billion less than estimated, and $1.3 billion less to the states for infrastructure due to delays in State-led projects.
“Today’s outcome is the result of a strong economy,” he said. “But we cannot be complacent. And we cannot risk a return to Labor.”
Before the numbers were released, Prime Minister Scott Morrison emphasised the government’s strategy was to stay on track to achieve a budget balance in 2019-20 and a surplus thereafter.
He said the government could adhere to that trajectory while fund the extra spending along the way because of its economic management.
“We have been focusing on growing the economy and getting investment moving in the country. And that’s why we’ve seen and we’ve been focusing on getting people off welfare and into work,” he told Sky News.
“These have been the key reasons why we’ve seen the improvement in our bottom line as a budget.
“We’ve taken strong decisions on expenditure, we’ve taken strong decisions around how we’ve tightened up entitlements.
“All of this together has improved a much stronger budget position so we can do the things that I’ve just been talking about, whether it’s our infrastructure investments, our investments in health services,” he said.
“We’ve had a trajectory to get the budget back into balance first in 2021 and in this year I announced that would come forward to 2019-20 and we remain on track for that.
“We’ll just continue to stick to that plan. By running a strong economy, we are able to stick to that plan, that’s why we’ve kept our AAA credit rating, which last week was upgraded.”