Australia confirms budget surplus in 2023, first in 15 years

AUSTRALIA has recorded its first budget surplus since the eve of the 2008 global financial crisis as an ultra-tight labour market and elevated commodity prices swelled the nation’s fiscal coffers.

The underlying cash surplus was A$22.1 billion (S$19.4 billion) in the 12 months through June 30 this year, or 0.9 per cent of gross domestic product, easily exceeding the A$4.2 billion windfall predicted in the May 9 budget.

Still, the government’s books are expected to slip back into the red as mineral prices retrace and a sharp tightening of monetary policy pushes up unemployment.

The center-left Labor government has been forced to bank most of the fiscal windfall to avoid further fueling inflation. It’s trying to act in concert with the Reserve Bank that raised its cash rate to 4.1 per cent in June from a record-low 0.1 per cent in April 2022.

The RBA has paused at its past three meetings amid signs that price pressures are beginning to abate.

“Our responsible budget management has not just delivered the first surplus in 15 years, it’s also taken pressure off inflation, interest rates and the cost of living,” Treasurer Jim Chalmers said in a statement. “By banking most of the revenue upgrade when inflation was at its peak, our budget strategy has been exactly right for the times and suited to the challenges we confront.”

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The surplus is the first by a Labor government since 1989-90 when Paul Keating was treasurer. That fiscal position was rapidly unwound as the nation slid into a deep recession in 1991.

“Despite the surplus for 2022-23, structural pressures are intensifying rather than easing on the budget and these will take more than one year or one parliamentary term to address,” Chalmers said.

In its May budget, the government forecast the books would swing back to a deficit of A$13.9 billion in the current fiscal year, widening to A$35.1 billion, 1.3 per cent of GDP, in 2024-25. BLOOMBERG