HIGHER tax revenues and the phasing out of pandemic-relief spending chopped the US federal government's budget deficit by a record US$1.7 trillion in the first 9 months of the fiscal year.

The US$515 billion gap for the October-to-June period compares with US$2.24 trillion in the same period a year ago, the Treasury Department said on Wednesday (Jul 13).

After blowing out during the pandemic, the US government's shortfall is slimming back down as employment and incomes rise while stimulus spending expires.

Receipts rose about 26 per cent in the nine-month period, to US$3.84 trillion, with more than half of that coming from individual income taxes, while spending dropped about 18 per cent, to US$4.35 trillion.

One area not helping the deficit is an increase in federal borrowing costs thanks to inflation and Federal Reserve interest-rate hikes.

Interest payments on public debt have climbed US$102 billion so far in the fiscal year. Most of that rise was due to bigger payouts on Treasury inflation-protected securities, known as TIPS.

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But costs are rising for nominal Treasuries as well. The weighted average yield on interest-bearing securities was 1.8 per cent at the end of June, up about 19 basis points from a year before, according to the Treasury. That gauge has climbed from 1.56 per cent in January, which was the lowest level in records going back to 2001. BLOOMBERG